Bailey, a 36-year-old mother of two, has won a recording contract and will support American pop superstar Beyonce on the UK leg of her Mrs Carter world tour in February.
The clear favourite before the announcement, Bailey said in front of 10,000 fans at tonight's live final at Wembley Arena that she did not know what to say after being told she had received over a million votes.
Earlier in the show, Bailey chose ballad The Power of Love as her song of the series.
Mentor and judge Sharon Osbourne's children Kelly and Jack congratulated the pair for the win:
The 17-year-old McDonald sang Angel by Sarah McLachlan as his song of the series in the X Factor final. Judge Nicole Scherzinger described the teenager as an "angel with buttery wings".
Bailey told X Factor that she will be celebrating by going on holiday to France:
I promised my daughter I would. She was really worried about me entering this competition - how she wouldn’t see me much and it has been hard being away from the kids. She’s really interested in the Eiffel Tower, Le Louvre and France generally so we’ll go over there together and my son can enjoy Disneyland Paris too. They’ve been so good and patient over the whole process, I want to treat them.