The indomitable world No.1 rallied from a set down to deny Djokovic an unprecedented 25th major singles triumph with a rousing 2-6 6-2 6-3 7-5 victory on Rod Laver Arena on Sunday night.
In inflicting a first defeat on Djokovic in 11 finals at Melbourne Park, Alcaraz added a maiden AO title to his two trophies each from the French Open, Wimbledon and US Open.
The Spanish sensation joins Don Budge, Fred Perry, Roy Emerson, Rod Laver, Andre Agassi, Roger Federer, Rafael Nadal and Djokovic as the ninth man to win all four of the sport's annual majors.
And at just 22 years and 272 days old, he is the youngest to achieve the rare feat.
American Budge was 91 days older when he completed the full set at the 1938 French Open.
Incredibly, Alcaraz has now won seven slams - surpassing stars including Stefan Edberg and Boris Becker and drawing level with fellow all-time greats John McEnroe, John Newcombe and Mats Wilander - in just 20 major appearances.
Fittingly, Nadal enjoyed a front-row view as Mark Edmondson, on the 50th anniversary of his 1976 Open triumph, presented the Norman Brookes Challenge Cup to his irrepressible countryman.
"It's a little bit weird seeing Rafael in the stands. It's the first time, I think, if I'm not wrong," Alcaraz said.
"You were watching me when I was like 15, 14 years old, so it's been a long time but, yeah, it's such an honour playing in front of you.
"It feels a dream come true. I dreamt about getting the Australian Open to complete the career grand slam, so I'm lost now. I don't even know what what to say.
"But it feels crazy, to be honest."
Alcaraz also paid tribute to his vanquished opponent, hailing Djokovic as an "inspiration".
"He deserves an ovation, for sure," the champion said. "For doing the amazing things he's doing."
Djokovic, though, accepted the night - and the spoils - belonged to Alcaraz.
"What you've been doing, I think the best word to describe it is historic, legendary," the gracious loser said.
With both coming off epic, marathon semi-final victories on Friday night, intrigue surrounded how the two gladiators would shape up physically for the blockbuster final.
Djokovic, 16 years older than his opponent, answered the question with a lightning start, breaking the top seed twice to take the opening set in emphatic fashion.
Typically, like the two heavyweights they are, Alacraz replied to level the match but was not happy when officials opted to partially close the roof on RLA because of rain drops and gusting wind.
Alcaraz raged at the umpire and tournament supervisor as Djokovic used the break to briefly take comfort in the locker room and seemingly regroup.
But on the wrong side of the second-largest age gap in grand slam final history, Djokovic appeared to suffer physically as Alcaraz broke the Serb twice to seize the pivotal third set.
Djokovic had to stave off six break points in the second game of the fourth set to keep Alcaraz at bay, then missed two break-point chances of his own that could have taken him to a 5-4 lead.
Opportunity lost, Djokovic dropped serve trying to stay in the contest at 5-6 as Alcaraz reigned supreme after a three-hour, two-minute slugfest.
In addition to trying to edge clear of joint-record-holder Margaret Court's 24 majors, at 38 years and 255 days, Djokovic had been bidding to become the oldest player in the open era stretching back to 1968 to win a grand slam men's singles title.
Instead the former world No.1 suffered his first final loss on his RLA battleground, where he had conquered six different opponents - Rafael Nadal, Andy Murray, Dominic Thiem, Daniil Medvedev, Stefanos Tsitsipas and Jo-Wilfried Tsonga - over a 15-year domination of the tournament.
Having also won last year's French and US Open titles, Alcaraz now holds three of the four grand slam trophies.
And, continuing their domination, Alcaraz and Jannik Sinner join Djokovic and Nadal as only the second pair ever to share nine consecutive grand slam titles.
Only Nadal and Federer, with 11 straight slams between 2005 and 2007, have enjoyed a longer stranglehold on the men's majors.
