Vow And Declare won a dramatic Melbourne Cup while Frankie Dettori's runner-up Master Of Reality was demoted to fourth after a stewards' inquiry.
Dettori was given a nine-meeting ban after the victor, trained by Australian Danny O'Brien, won in a tight finish.
Stewards ruled Dettori, riding for Irish trainer Joseph O'Brien, impeded Il Paradiso, who was fourth past the post for Joseph's father Aidan.
Il Paradiso was promoted to third, with British hope Prince Of Arran second.
Dettori looked to have sealed his first victory in the two-mile Flemington race 'that stops a nation' but Craig Williams claimed his maiden Melbourne Cup triumph on Vow And Declare before more drama in the stewards' room.
Italian-born Dettori, 48, was banned for nine racedays in the state of Victoria, up to and including 13 November.
Prince Of Arran's jockey Michael Walker was fined AUS10,000 (£5,400) and suspended for seven race meetings for overuse of the whip.
But there was only elation for Williams, who said of his mount: "It was a privilege to ride him today and great to be associated with such a great horse."
Winning trainer O'Brien was also celebrating a first Melbourne Cup victory, with the four-year-old gelding who was bred in Australia.
"I really can't believe it, I just feel incredibly blessed to have a horse good enough to be in it. The last 100 (metres) he just wouldn't give in," said O'Brien, who is no relation to the Irish father-and-son trainers.
Asked where the horse's name came from, owner-breeder Paul Lanskey said he was named after his father.
"Dad would come home from the pub and say to mum: 'I vow and declare I've only had a few beers.'"
Prince Of Arran was awarded second after the inquiry, having finished third last year for British trainer Charlie Fellowes.
"I'm incredibly proud of the horse. To do what he has done two years in a row is a remarkable achievement," said Fellowes.
The build-up to the race had seen animal welfare in the spotlight after recent cruelty scandals in Australia.
Of the 24 runners, 23 horses returned back safely, although Rostropovich was found to be lame and taken to the University of Melbourne Equine Centre for further assessment.
How the drama unfolded
Dettori, who first rode in the Flemington race 26 years ago when Master Of Reality's trainer was just six months old, sensed this could be his chance to finally claim the AUS$8m (£4.3m) race.
The three-time Britrish champion jockey, who has ridden a personal record of 19 top-level Group One winners this year, was always handily placed and pushed his mount clear as the race developed in the final quarter-mile.
But just as Master Of Reality looked to have stolen the prize, Williams shot up the inside on Vow And Declare.
Meanwhile, Prince Of Arran came into contention and Il Paradiso finished with a late flourish under Wayne Lordan.
The pair were closing all the time before being checked as Dettori drifted to his left and Vow And Declare just managed to keep on for a narrow victory.
It was another Melbourne Cup to forget for Dettori, who was banned for a month and fined A$20,000 for careless riding on Max Dynamite, runner-up to Prince Of Penzance in 2015.
Joseph O'Brien, who won the 2017 Melbourne Cup with Rekindling, was disappointed Master Of Reality could not give Dettori his first win in the race, with the Italian having also finished second in 1999 on Central Park.
"I'm more gutted for Frankie than I am for myself," the trainer told The Age newspaper.
"I'll be back. I don't know if Frankie is ever going to win this race."
Full Melbourne Cup result
1 Vow And Declare 10-1 2 Prince Of Arran 16-1 3 Il Paridiso 14-1 4 Master Of Reality 25-1
(Master Of Reality demoted from second to fourth, Prince Of Arran promoted from third to second, Il Paradiso up to third)
5 Surprise Baby 6 Mer De Glace 7 Finche 8 Cross Counter 9 Steel Prince
10 Magic Wand 11 Twilight Payment 12 Sound 13 Constantinople 14 Mirage Dancer 15 Hunting Horn 16 Raymond Tusk
17 The Chosen One 18 Latrobe 19 Southern France 20 Youngstar 21 Neufbosc 22 Downdraft 23 Mustajeer 24 Rostroprovich
BBC racing correspondent Cornelius Lysaght
A dramatic Cup all-round with a 'ripper' of a close finish, ending with success for the first Australian winner for three years - to the relief for the locals - and then came Dettori's demotion.
Dettori has never had as much luck Down Under as in Europe and elsewhere, but the suspension following clear interference late on that supporters of Il Paradiso insist cost their fancy the race, is not as severe as it might have been - four years ago he received a month off when runner-up.
Though disqualified from second place, Master Of Reality's prominent run is yet another feather in Joseph O'Brien's cap, while what a trooper Prince Of Arran is.