Ko finished on 16-under-par 268 -- six shots clear of American Lexi Thompson with China's Feng Shanshan in third place -- a further two strokes adrift.
It was a dominant display from Ko, who aged 18 years and 142 days, takes the record from American Morgan Pressel, who was 171 days older when winning the Kraft Nabisco back in 2007.
Pressel had started the final round tied with Ko on eight under -- two shots adrift of overnight leader Mi-Hyang Lee -- but slumped to a final round 75 as her old record was broken.
"I can leave my name a little bit in the golf history books," said Ko after sealing her victory.
South Korea's Lee also suffered a last day hiccup to card a three-over 74 as the final round firmly belonged to New Zealand's remarkable teenage prodigy Ko.
She ripped through the par-71 course with eight birdies -- four coming between the seventh and 12th to take the lead for good.
When Thompson double bogeyed the 14th, Ko went three clear and she rounded off her victory in style with back to back birdies on the closing two holes.
"Just to shoot 8-under on any day is a pretty solid round., but on the final day of a grand slam event, playing like that is a dream come true," she added.
She already held the record for the youngest winner on the LPGA Tour as a 15-year-old amateur to claim the Canadian Open in 2012..
Ko is also the youngest to reach No.1 in the world rankings in February earlier this year, but will remain in second spot behind South Korea's Inbee Park, who has won two majors this season.
Park finished with a fine 68 to finish just inside the top 10 on five-under-par, but was never able to seriously challenge for the title in the final major of the season.
Ko has set her sights on reclaiming the top spot but also revealed her big goal for 2016 when golf is included in the Rio Olympics.
"Since they announced the return of golf to the Olympics, I've been super excited about it. It's one of my goals, there's no greater honor than playing for your country at the games," she said.