The UAE made a rapid rise up the passport rankings to claim the number one spot, while Australia came in at seven.
United Arab Emirates (UAE) leaders have described its rapid rise up the passport rankings to the most powerful in the world as an "historic achievement".
The latest Passport Index found UAE passport holders are able to visit 167 countries without securing a visa in advance - 113 countries visa-free and 54 using visas on arrival.
It just beat last year's top passport, Singapore.
To mark the announcement, Dubai's Burj Khalifa tower was lit up with images of UAE passports and a giant number one.
It's a rapid rise from sitting in 27th spot just two years ago.
The Gulf News credited the "historic achievement" to rapidly signing new visa arrangements with other countries this year, including four agreements which came into effect on December 1.
The UAE "has surpassed all expectations after accomplishing this achievement," the outlet said.
"In 2017, the UAE announced an ambitious goal of becoming one of the five most powerful passports in the world by 2021 ... the country has achieved this goal three years before the deadline."
Abu Dhabi Crown Prince Shaikh Mohammed Bin Zayed Al Nahyan said on social media, "thanks to Allah Almighty, the UAE passport has been ranked 1st globally, an achievement which reflects our right approach and future vision".
Singapore and Germany were both ranked number two, with its citizens able to travel to 166 countries without obtaining a visa in advance.
Australia was ranked 7th at 161 countries.
Afghanistan was ranked last, with Iraq, Pakistan, Syria and Somalia rounding out the bottom five.
There are several passport rankings released at different times of the year.
In October, the Henley Passport Index found Japan had the most powerful passport at the time.