Azarenka moved from No. 3 to No. 1, overhauling Wimbledon champion Petra Kvitova, who will remain at No. 2 after her semifinal exit in Australia.
The 22-year-old Belarusian is the 21st player to hold the No. 1 spot since computer rankings were introduced in 1975.
The WTA said Saturday that the new rankings, which will take effect Monday, show Sharapova moving up one spot to third and Caroline Wozniacki, who held the No. 1 ranking for nearly 67 weeks before losing in the quarterfinals here to Kim Clijsters, dropping to fourth.
U.S. Open champion Sam Stosur, who lost in the first round at Melbourne Park, moves to fifth from sixth despite the poor result at her home major, while Agnieszka Radwanska is a career-high No. 6.
Marion Bartoli of France, formerly No. 9, moves up to seventh, also a career high, while Vera Zvonareva is No. 8, French Open champion Li Na is No. 9 and Andrea Petkovic, who withdrew from the Australian Open due to a stress fracture in her back, stays at No. 10.
Li dropped four places from fifth after she lost in the fourth round to defending champion Clijsters. The Chinese star had a high number of ranking points to defend as a losing finalist to Clijsters here last year.
Clijsters, who lost in the semifinals to Azarenka this year at Melbourne Park, is projected to drop to about 30th from No. 11.
Serena Williams, who lost in the fourth round, will remain at No. 12.
"I've been loving coming to Australia since I was a junior, and I've had an amazing month and this is a dream come true," Azarenka said
She had a 55-17 win-loss record in 2011, winning three titles and finishing runner-up in two others.
She started 2012 strongly, defeating three top 10 players in a row en route to her ninth career singles title at the Sydney International. She remains undefeated in 2012 with a 12-0 record.
She is the third player to achieve the top ranking directly after claiming a first Grand Slam singles title: Martina Navratilova moved to No. 1 after winning Wimbledon in 1978 and Ana Ivanovic took top spot after winning the 2008 French Open.