Ceremony host Lauren Laverne introduced Blake as James Blunt at the Roundhouse last night, but later apologised on twitter for her slip-up.
Retrograde is the first single from Blake's album Overgrown.
Blake, a 25-1 outsider to win, is a Goldsmiths College music graduate who was previously nominated for the Mercury for his self-titled debut album which he recorded at his home in New Cross, south east London.
Accepting his award, he said it was "amazing" to be in the running for an award with chart veteran David Bowie.
Asked what he would spend the money on, he said: "I'll make sure it goes to some good use".
He added: "This is the first award I've ever won apart from a tennis trophy which I won when I was about 12-years-old at my school and I'll hold them in equal esteem".
Londoner James Blake has been awarded this year's Mercury Prize. His album 'Overgrown' was selected by a panel of industry judges. The singer from Enfield was among 6 London artists shorlisted and beat the likes of David Bowie as well as former winners The Arctic Monkeys.
Londoner James Blake has been awarded this year's Mercury Prize. His album 'Overgrown' was selected by a panel of industry judges - the singer from Enfield was among 6 London artists shorlisted and beat the likes of David Bowie as well as former winners The Arctic Monkeys.
James Blake - Overgrown
Blake is a Goldsmiths College music graduate who was previously nominated for the Mercury for his self-titled debut album which he recorded at his home in New Cross. The musician, produced his second album himself and it features contributions from Brian Eno and RZA from Wu-Tang Clan.
Disclosure - Settle
Disclosure is made up of musician brothers Howard and Guy Lawrence, aged 19 and 22 from Reigate in Surrey. The electronic duo went to number one with the release of their debut album this year. It features vocals by collaborators from solo stars such as Jessie Ware, Eliza Doolittle and Jamie Woon.
Judges said: "A joyous pop record for clubbers; an infectious dance record for pop fans."
Rudimental - Home
Electronic music quartet Rudimental are based in Hackney, and released their debut album in April. They have worked with guest vocalists such as John Newman and have already notched up two chart-topping singles with Feel The Love and Waiting All Night.
Savages - Silence Yourself
The all-female pop-punk act - with a name inspired by literary classic Lord Of The Flies - formed two years ago and made their debut supporting British Sea Power. The London-based band released their debut album in May.
Judges said: "Art-punk for our times - intense, enthralling and formidable."
David Bowie - The Next Day
The Next Day became Bowie's 24th studio album when it was released in March of this year and broke a recording silence of a decade.
London acts dominate list of nominations for the 2013 Mercury Music Prize, including Rudimental, Savages, Disclosure, James Blake and David Bowie.
The six London acts up for the Mercury Music Prize have lost out to a band that formed in Leeds.
In the last hour, alt-J have been named this year's winners of the prestigious award. The ceremony was held at the Camden Roundhouse in north London.
South London singer-songwriter Jessie Ware is in the running for this year's Mercury Music Prize.
It is awarded annually for the best British album.
You may not have heard much about Jessie yet, in fact her debut single did not even make it into the charts last year. But in the world of showbiz, fame and fortune is just a music prize away.
She has been speaking to our Entertainment Correspondent Lucrezia Millarini.