A 50,550 crowd at Brisbane's Suncorp Stadium were shocked into disbelief after watching the Kangaroos relinquish their grip on the trophy they had held since 1972.
Full-back Lance Hohaia scored two tries, including a controversial penalty touchdown awarded by English video referee Steve Ganson, as the Kiwis ended an eight-match losing run at the hands of the arch enemy stretching back to their Tri-Nations Series win in 2005.
New Zealand coach Stephen Kearney told Sky Sports 2: "It was a wonderful effort tonight, we put them in a place they're not used to.
"It was just a matter of keeping them in an arm wrestle and the first 15 minutes of the second half were very important. I'm just overwhelmed."
Benji Marshall added: "From where I've come from, with all my injuries, to come here and pull it off, I'm just stoked."
Captain Nathan Cayless insisted his men had always believed they could win the title from the Kangaroos for the first time in 36 years, despite their 30-6 loss in the group stage.
"I just want to thank the boys who've been outstanding. They took their opportunity and it's just unbelievable.
"We kept talking to ourselves and working hard. We knew we could play a lot better than in the first game and we really deserved this, we worked hard for it."
Australia captain Lockyer said: "Congratulations to New Zealand on a great game tonight. It wasn't to be."