The 47-year-old singer, whose hits include Torn and Wrong Impression, performed in disguise as Panda throughout the series and managed to deceive the judging panel.
She beat singer Charlotte Church, who was disguised as Mushroom, during a closely fought final studio audience vote.
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After being unmasked, she said: “I just loved being Panda. When I put the costume on I would just become Panda.”
Reflecting on how she managed to avoid being identified, she said: “I stayed in an American accent the whole time so if I sound weird that’s because I have been flipping.
“I just had so much fun. I made friends with a traffic cone and a mushroom. This is an amazing show and I am thrilled to have been a part of it.”
Imbruglia first found fame starring as Beth Brennan in the Australian soap Neighbours in the early 1990s.
She began her singing career three years after leaving the show and had a worldwide hit with her cover of Ednaswap’s song Torn.
The Masked Singer which is presented by comedian Joel Dommett, sees famous contestants disguised in elaborate costumes sing in front of a celebrity panel who have to guess their true identity.
The panel’s incorrect guesses included Jennifer Hudson, High School Musical star Vanessa Hudgens, Lea Michele from Glee and even adventurer Bear Grylls.
Three anonymous stars competed in the final, with Westlife star Markus Feehily first to be revealed as Robobunny after losing out in the first public vote of the night.
“Being hidden inside the costume gave me a chance to forget about what I look like for the first time in my career,” he said.
Then Welsh classical singer Church was revealed following an impressive performance of Flower Duet from Leo Delibes’ opera Lakme.
Saturday’s show also saw Panda deliver a sassy performance of Blank Space by Taylor Swift, while Robobunny impressed with an impassioned and dramatic rendition of Run by Snow Patrol.
Three former contestants from previous series – Girls Aloud star Nicola Roberts as Queen Bee, comedian Jason Manford as Hedgehog and JLS member Aston Merrygold as Robin – also returned to duet with the finalists ahead of the first elimination.
Regular panellists Rita Ora, Jonathan Ross, Davina McCall and Mo Gilligan were joined by special guest singer Joss Stone, who won the second series performing as Sausage.
Following the reveal, Imbruglia shared a video on Instagram of her watching the finale with friends at home and laughing with delight at the panel’s reaction to her being unmasked.
She captioned the post: “So there you have it..I am Panda! Such fun… what a great experience and thank you to everyone on the show and to all who helped me keep the secret!!!”
During last weekend’s semi-final, Destiny’s Child star Michelle Williams was revealed as Rockhopper and Traffic Cone turned out to be classical singer Aled Jones.
Other celebrities who have been unmasked during this series include former England footballer Michael Owen, singer Will Young and broadcaster Gloria Hunniford.
The first series of The Masked Singer was won by Girls Aloud star Nicola Roberts, who performed as Queen Bee, while singer Stone took the crown during the second season.
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