The sport's 214 federations cast their votes in Beijing to decide who should lead the sport, which is dealing with the fall-out from a series of doping allegations.
Coe, the former London 2012 chairman, succeeds Senegalese Lamine Diack, 82, who has been in charge for 16 years. Coe polled 115 votes to Ukrainian pole vault legend Sergey Bubka's 92.
The election was held three days before the 2015 World Championships get under way in Beijing and Coe's initial term will be for four years.
The Olympic gold medallist in 1980 and 1984 praised the organisation for how the contest was conducted, saying it was "fought according to sound judgement throughout".
Coe and fellow Britons Steve Cram and Steve Ovett fought a famous rivalry during the 1980s in middle distance running, in what was seen as a golden age for the sport.
He said his IAAF presidential win was the "second biggest and [most] momentous occasion of my life" after the birth of his children.
"Delighted and humbled by the confidence shown in me by the IAAF family - thank you, now the hard work begins," he tweeted shortly after the result.
Following his defeat, Bubka said: "I know that athletics in the future will grow, and become stronger and stronger."
Volunteers put hurdles on the track at the Bird's Nest stadium in Beijing - 18 August 2015
The vote comes three days before the 2015 World Championships in Beijing
Both Coe, 58, and Bubka, 51, who won Olympic pole vault gold in 1988, were IAAF vice-presidents and had pledged to reform athletics in their manifestos.
They both said they wanted the sport to appeal to a wider audience and attract younger people.
However, the anti-doping agenda began to dominate the election following a series of harmful allegations.
Coe, who had been backed by double Olympic champion Mo Farah to "change athletics", promised the creation of an independent anti-doping panel to address the issue within his first 100 days in office. Bubka wanted a "very deep study" to look at introducing tougher sanctions for cheats.
Following Coe's election, World Anti-Doping Agency president Sir Craig Reedie, said: "We look forward to a positive and strong relationship with the new president in his avowed plans to protect the rights of the clean athlete."
UK Athletics chairman Ed Warner told BBC Radio 5 live: "It's momentous for the sport . This felt like a cross roads for me. The challenges facing Athletics are such that we need a great president right now and I do believe Seb's got the range of skills and the character that's required too really pull us forward."
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