The 31-year-old needed a tiebreak to clinch an error-strewn first set but romped away with the second for a 7-6(3) 6-0 victory to become the oldest woman to lift the Daphne Akhurst Memorial Cup.
Li was the first Asian player to win a grand slam singles title at the French Open in 2011 and ended her 31-month membership of the "one-slam wonder" club when her Slovakian opponent sent a forehand long after 97 minutes.
Losing the final to Kim Clijsters in 2011 and Victoria Azarenka last year, both times after winning the first set, had only added to Li's reputation as a formidable player with a major flaw in her temperament.
"At last I made it. Not like the last two times, always feeling one more step. But this time I did it so I'm really so proud of myself," the fourth seed rejoiced.
"In the French I was feeling I would just go for it. I didn't think about winning or losing. But this one, I was really wishing I could do well. And also maybe you guys didn't know how hard I was working mentally to make this one."
Cibulkova, one of the shortest women in the game at just 5ft-3in (1.6 metres) tall, had beaten four top 20 players, including third seed Maria Sharapova, on her fairytale run to her first grand slam final.
The 24-year-old dynamo was still smiling at the end of the final and described the tournament as the "most fantastic two weeks of my life".
"It was my first grand slam final and I'm just proud with the way I handled it," she said. "It wasn't easy against her because she was playing extremely well. So I'm quite happy."
The heatwave of the first week of the tournament was a distant memory when the players took to the court on Saturday evening with a chilly breeze blowing across Melbourne Park.
If 20th seed Cibulkova was hoping to ride the momentum of her ruthless semi-final demolition of Agnieszka Radwanska she got a quick reality check when Li broke her first service game on a double fault.
Even at that early stage, it looked like Li only had to tighten up her first serve and cut out the errors in her forehand as her power, when her range was accurate, was overwhelming Cibulkova.
The Slovakian's run to the final was built not only on her aggression and energy but also on mental strength, however, and she broke back for 3-3 when Li double-faulted on two successive points.
Li upped her level to break again for 6-5 and had a set point on her own serve only for Cibulkova to send the match to a tiebreak when Li netted a backhand.
The Chinese charged to a 5-1 lead in the tiebreak and, with 25 unforced errors to her name, took a one set lead after 70 minutes when Cibulkova also netted a backhand.
Cheered on by the traditional Mandarin rallying cry of "jia you" - literally "add oil" - Li rode her own momentum to grab an early break in the second set.
Li had a similar lead over Clijsters three years ago, though, before another of the meltdowns that have afflicted her over her career kicked in and she lost to the Belgian.
Argentine coach Carlos Rodriguez has toughened her up over the last year or so, however, as was evident when she saved match point before beating Lucie Safarova in the third round.
Cilbulkova's celebratory fist pumps were now becoming fewer and fewer - she hit just 11 winners in the match and four in the second set - as Li got better and better.
"After she won first two games, she just relaxed," Cibulkova said. "She was more relaxed and she was going for her shots.
"After that was impossible for me to be aggressive because she was just really, really playing well."
Li was now finding the lines with her rasping backhands and the less dependable but equally forceful forehands and she broke the Slovakian's serve for the fifth time on her second championship point to clinch the title.
Clearly close to tears, Li held her arms aloft in triumph before warmly embracing Cibulkova at the net and racing over to climb on top of a cool box and celebrate with her team the stands.
Her triumph was watched by hundreds of millions of her compatriots on TV back home but she has also become a firm Melbourne Park favourite after two defeats in the last three finals.
Famous for her quirky sense of humour, Li did not disappoint after collecting the trophy from Chris Evert by thanking her agent Max Eisenbud for "making me rich" as well as aiming another joke at her husband Jiang Shan.
"Hitting partner, fix the drinks, fix the rackets, you do a lot of jobs," she grinned as Jiang laughed along in the stands. "Thanks a lot, you are a nice guy. You were lucky to find me."
There were two first time grand slam champions after the men's doubles finals closed the penultimate day of the tournament when Lukasz Kubot and Robert Lindstedt beat Eric Butorac and Raven Klaasen 6-3 6-3.
Swiss Stanislas Wawrinka gets his chance to join them when he takes on world number one and 13-times grand slam champion Rafa Nadal in the men's singles final on Sunday.
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