He earned 264 points from the votes cast by 142 national team coaches to beat off the challenges of French team mate Thierry Henry of Arsenal and his Real Madrid club mate Ronaldo of Brazil, last year's winner.
Zidane was voted in first place by 35 coaches, Henry was voted first by 21 coaches and collected 186 points while Ronaldo was voted first by 26 coaches for a total of 176 points.
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Zidane's success in the prestigious event means he equals Ronaldo's feat in winning the award three times, the only three-times winners since it began in 1991.
It also represents a hat-trick for Real Madrid following Luis Figo's victory in 2001 and Ronaldo last year.
Zidane, then with Juventus, was winner in 1998, when he won the World Cup with France, and again in 2000, when France won the European Championship. Ronaldo won the award in 1996, 1997 and 2002.
Henry was a popular pre-event favourite to break Real Madrid's grip on this prize and to become the first player from an English club to be the world player of the year. The 13 awards have now been won seven times by Italian clubs and six times by Spanish clubs.
Pavel Nedved of the Czech Republic and Juventus was fourth with 158 points and Roberto Carlos of Brazil and Real Madrid sixth with 105.
Ruud van Nistelrooy of Manchester United and the Netherlands was sixth and David Beckham of Real Madrid and England was seventh ahead of his club-mate Spaniard Raul and Italian Paolo Maldini who captained AC Milan to their European Cup triumph this year.
The winner of the FIFA women's world player of the year was Birgit Prinz of Germany.
Celtic won FIFA's Fair Play Award for the behaviour of their supporters throughout their run to the UEFA Cup final last season and especially for their sportsmanship following their defeat to Porto in the final in Seville.
The Iraqi football community was awarded the Presidential Award.