Rekindling won the Melbourne Cup as young Irish trainer Joseph O'Brien's horse dramatically beat his father Aidan's Johannes Vermeer into second.
Max Dynamite finished third in a 1-2-3 for Irish-trained horses at Flemington.
Johannes Vermeer looked set to bring another big triumph for record-breaking trainer Aidan O'Brien.
But it was his son Joseph, 24, who won at the first attempt with jockey Corey Brown taking the lead on 14-1 shot Rekindling in the closing stages.
Known as the "race that stops a nation", the event is the world's richest two-mile handicap, worth A$6.2m (£3.6m) and watched by 90,000 people at the track.
'An absolute star'
Joseph O'Brien only began training last year after retiring from a successful riding career aged 22, and becomes the youngest trainer to win in the 157th running of the race.
"I can't quite believe it. I'm just so delighted for everyone," the winning trainer said.
"This is unbelievable. It hasn't really sunk in yet."
His father, who has never won the Melbourne Cup and did not travel to Australia, congratulated him over the phone.
"It's absolutely marvellous and I couldn't be any happier," said O'Brien senior. "It's the perfect result."
Australian racehorse owner Lloyd Williams, who had the first two home as he celebrated a sixth Melbourne Cup triumph, praised the trainer.
"I'm proud of this young man. He's an absolute star," said Williams.
"I have been telling anyone who will listen to me that Joseph will be the leading trainer in the world in years to come, his father needs to watch out.
"You have just seen the start of an amazing career kick off right here in Melbourne. He's an absolutely extraordinary young man and this is an amazing achievement."
Favourite Marmelo, trained by Hughie Morrison, was among the leaders around the turn to raise hopes of a first British winner, but faded from contention to finish ninth.
Brown timed his run to perfection on the three-year-old Rekindling - the youngest victor for 76 years - to win for the second time after success with Shocking in 2009.
"It's a dream to win the race again. I'm just lost for words," said the 41-year-old jockey.
Big Duke was the best Australian-trained finisher in fourth, with the first Scottish runner Nakeeta in fifth.
Thomas Hobson, a stablemate of third-placed Max Dynamite (who was also second in 2015 for Irish trainer Willie Mullins), was sixth under 18-year-old Ben Allen, after jockey Joao Moreira was injured in a fall earlier on the card.
Last year's winner Almandin, ridden by Frankie Dettori, was 12th.
BBC racing correspondent Cornelius Lysaght
When Joseph O'Brien quit the saddle last year after a career which saw him win major prizes aplenty, including the Epsom Derby - once on a horse called Australia - clearly the hope was that he could carry on the family tradition.
Early signs have been more than promising, but, even so, to win one of the world's greatest prizes - which has so far eluded Dad - so soon in his career is pretty extraordinary. It all bodes well if, as expected, one day the baton is passed on.
An astonishing result too for Europe which supplied nine of the first 11 home - though the British missed out again with a best finisher Nakeeta in a gallant fifth.
The O'Briens - a family affair
Rekindling's win is another in a long line of landmarks for the O'Brien family.
Aidan O'Brien is considered one of flat racing's greatest all-time trainers and had been grabbing the headlines this year.
The 48-year-old, based in County Tipperary, has set a new world record with 27 wins at the top Group One level in 2017.
Joseph, the eldest of four children all involved in racing, was the youngest jockey to win a Breeders' Cup race when he triumphed on St Nicholas Abbey for Aidan in 2011.
The following year they became the first father-son/trainer-jockey combination to win the Derby, with Camelot.
Joseph, at nearly 6ft tall, quit as a jockey after struggling with his weight, but is already making history as a trainer.
Melbourne Cup finishing order
1 Rekindling 14-1, 2 Johannes Vermeer 12-1, 3 Max Dynamite 19-1 4 Big Duke 20-1
5 Nakeeta, 6 Thomas Hobson, 7 Tiberian, 8 Libran, 9 Marmelo, 10 Wicklow Brave, 11 Red Cardinal, 12 Almandin, 13 Cismontane, 14 Amelie's Star, 15 Boom Time, 16 Wall Of Fire, 17 Single Gaze, 18 US Army Ranger, 19 Humidor, 20 Hartnell, 21 Ventura Storm, 22 Bondi Beach, 23 Gallante
Overseas winners of the Melbourne Cup
1993 Vintage Crop - Ireland
2003 Media Puzzle - Ireland
2006 Delta Blues - Japan
2010 Americain - France
2011 Dunaden - France
2014 Protectionist - Germany
2017 Rekindling - Ireland