The Trek-Segafredo rider outsprinted Zdenek Stybar, last year's winner, at the finish in Siena, with the latter's Etixx-Quick Step team-mate Gianluca Brambilla finishing third four seconds back.
World champion Peter Sagan of Slovakia was fourth at 13sec at the end of the 176km race around southern Tuscany known for its white gravel roads.
The big hitters did not disappoint in the race’s 10th edition, entitling the Strade Bianche to its self-proclaimed title, the “northern classic in the south of Europe.”
Sagan attacked on the final gravel sector blowing the race apart. He, Stybar and Cancellara reeled in Brambilla, the final remnant of an earlier five rider breakaway.
Brambilla launched attack after attack, pulling clear to lead from 5km to the final steep climb up the Piazza del Campo. It proved his nemesis and Cancellara and Stybar moved around him. Cancellara grabbed the best position around the last bend at 100m to go, emerging victorious.
With this victory Cancellara writes his name in the history of the race, with the sixth gravel sector to be named after him.
"This day is special. I had to play my best cards. I'm speechless, I'm happy as a kid," Cancellara said. "The most decisive moment was when Peter made the acceleration, and I managed to jump up to him and Stybar.
"It wasn't a big collaboration between us because we are all big riders, plus Etixx had a team game to play. I think my work in the last 5km was risky, but it was the only way. I knew that I couldn't let Brambilla get too far ahead, despite Etixx-Quick Step outnumbering me.
"I used my experience and confidence to leave it to the very end. It's because I know myself very well."
Cancellara also acknowledged the work of his Trek-Segafredo team-mates wheedling the peloton ahead of the longest gravel sector and reduced the gap to the five-man breakaway.