The South Korean-born prodigy took the top spot at 17 years, nine months and seven days.
"It's a big honor to be the world number one," Ko said. "To have that honor by my name, I can't believe it."
Ko eclipsed the age marks of South Korean Shin Ji-Yai, who was the youngest prior women's world number one at age 22 in 2010, and US star Tiger Woods, who was 21 when he ascended to number one for the first time in 1997.
"Tiger Woods, he's amazing," Ko said. "I just try to have fun out there and I just came into the ranking. I'll just try to keep focused and not worry about the ranking and learn from this season."
Ko squandered a four-stroke lead and struggled on the final holes to help South Korean Choi Na-Yeon capture the title on 16-under par 272 with Ko, American Jessica Korda and South Korean Jang Ha-Na sharing second on 273.
Despite a double bogey at 17 and a struggle just to close with a par, Ko did just enough to overtake Park In-Bee for the top ranking after the South Korean shared 13th on 284.
"When I heard the news I kind of went, 'Really?' and made a face," Ko said. "It was tough finishing with the last two holes like that."
Ko fired a 71 Saturday while Choi fired a 68 in the final round, staged a day earlier than usual to avoid a last-day conflict with American football's Super Bowl.
"I played so well for so long," Choi said. "I was really nervous."
It was another taste of history for Ko, who won the 2012 and 2013 LPGA Canadian Women's Open titles as an amateur, the first of those at age 15 making her the youngest winner in LPGA history.
That success prompted Ko to turn professional and the LPGA to allow Ko to join the tour in 2014, when she won three titles, was named LPGA Rookie of the Year and captured the season-ending Tour Championship and the season points prize for a record $1.5 million payday last November.
- Choi fights back to win -
Ko began the final round with a one-stroke lead and opened with back-to-back birdies to seize a four-stroke lead on the field.
Choi answered the challenge and took her first victory since 2012.
Choi birdied three holes in a row starting at the third. While Ko birdied the par-5 fifth hole but took a bogey at the eighth, Choi birdied the par-5 seventh but closed her front nine with a bogey.