People Magazine bestowed the pop culture title on the Iron Man actress Wednesday, as part of its annual "World's Most Beautiful" issue hitting newsstands on Friday.
Though the 40-year-old is often depicted in glamorous fashions on the red carpet, Paltrow told the magazine that "around the house, I'm in jeans and a T-shirt. I don't really wear makeup."
"I feel my most beautiful when I am truly myself."
Paltrow, who is married to Coldplay frontman Chris Martin and mother to their two children, credited her workout routine for keeping her looking young and feeling strong.
Paltrow takes the People title from her friend, singer Beyoncé Knowles, named in 2012.
"I honestly thought someone was playing a joke on me," Paltrow said of first learning about her honour from the celebrity magazine.
"I had to reread the e-mail three times...It's a very iconic cover in American culture, so it's just amazing."