Davuluri follows Miss New York winner Mallory Hagan, who was crowned Miss America last year.
Davuluri, 24, was in tears as she walked the runway in a canary-yellow evening gown.
Davuluri was crowned Miss New York last July. She is the first Indian-American to have been named Miss New York.
She performed a traditional Bollywood dance during the talent portion of the competition. At first she didn't hear her name when it was called.
In an earlier interview, Davuluri said that she'd like to win the Miss America title like every other contestant.
"Everything happens for a reason. If it's meant to be it's meant to be. It's a win-win just to be in it."
Davuluri also indicated that she felt like she had performed well in the lifestyle/fitness, evening gown, talent and interview sections.
Her question for the interview portion was: Julie Chen had plastic surgery to appear less Asian. What do you think of her decision? Davuluri said she opposes plastic surgery, but added, "I've always viewed Miss America as the girl next door and the girl next door is evolving."
The pageant was hosted by Lara Spencer and Chris Harrison.
Congratulations are in order for Davuluri who plans to become a physician.