The 25-year-old French-born Algerian international, outstanding in Leicester's incredible charge towards the Premier League title, received the trophy at a lavish awards ceremony in London.
Tottenham Hotspur midfielder Dele Alli was named Young Player of the Year at the Professional Footballers' Association (PFA) awards.
Paying tribute to his team-mates, Mahrez, who succeeds Chelsea's Eden Hazard as the winner of the prize, told the ceremony: "All the credit is for them, seriously.
Mahrez magic keeps Leicester flying high
"And for my manager [Claudio Ranieri] and the staff. Without them I wouldn't receive this award and I wouldn't score. It's the team spirit, and I want to dedicate it to them.
"I'm very grateful to receive this award, it's a pleasure. It's extra special because if the players vote for me it's because they've seen I've been great this year so I'm happy.
"But it's more team things. Without my team-mates I wouldn't get this award."
Mahrez is the first African to win the award and just the second non-European, after the Uruguayan striker Luis Suarez, then of Liverpool, in 2014.
Title in Leicester's hands, admits Ranieri
A £400,000 signing from French Ligue 2 side Le Havre in January 2014, Mahrez has contributed 17 goals and 11 assists to help put Leicester on the brink of becoming English champions for the first time.
He had scored the opener in the Foxes' 4-0 thrashing of Swansea City earlier in the day at the King Power Stadium, which left Claudio Ranieri's side eight points clear of second-placed Tottenham with three games left to play.
Mahrez was then flown by helicopter to the ceremony as he pipped club colleagues Jamie Vardy and N'Golo Kante as well as West Ham United's Dimitri Payet, Tottenham's Harry Kane and Arsenal's Mesut Ozil to the award.
Alli, 20, held off competition from Kane, Stoke City goalkeeper Jack Butland, Liverpool midfielder Philippe Coutinho and Everton duo Romelu Lukaku and Ross Barkley to take the young player gong.
Alli, who won Football League Young Player of the Year 12 months ago, joined Tottenham from third-tier Milton Keyes Dons in 2015 and was expected to be used sparingly in his first season at White Hart Lane.
However, he has been outstanding in midfield for Spurs and has already won six caps for England, scoring once.
He was not there to pick up his award in person as Tottenham play West Bromwich Albion in the Premier League on Monday, but recorded a video message.
"Sorry I can't be there tonight, but we have a big game tomorrow. Thank you to everyone who voted for me," Alli said.
"I feel honoured to win such a prestigious award and thank you to my friends, family and all the staff at Tottenham."
Manchester United great Ryan Giggs, now the assistant to manager Louis van Gaal, followed in the footsteps of his former manager Alex Ferguson by winning the PFA Merit Award.
Manchester City midfielder Izzy Christiansen won the PFA Women's Player of the Year award, with Sunderland forward Beth Mead taking home the young player equivalent.
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