The choice of Muldoon as winner from a shortlist of 10 was announced at an Oscars-style ceremony in South Kensington, London. The £5,000 award was presented by Valerie Eliot, T S Eliot's widow, who helps fund the two-year-old prize.
The former BBC radio producer in Northern Ireland was the unanimous choice of the five poets on the judging panel - Elaine Feinstein, Cairan Carson (last year's winner), Candia McWilliam, John Fuller and Robert Crawford.
His success is no surprise. Muldoon was considered a front-runner for his latest edition of poetry, The Annals of Chile, published by Faber and Faber, and has won plaudits since 1972 when he published his first collection, New Weather, at the age of 21.
He beat another tipped front-runner, Kathleen Jamie, along with John Burnside, Eavan Boland, W N Herbert, Geoffrey Lehmann, Tom Paulin, Peter Porter, Hugo Williams and Gerard Woodward.
Ms Feinstein said: "In an exceptionally rich year Paul Muldoon was the unanimous choice of the committee for the energy of his language, the hurtling force of his line and the seemingly effortless spontaneity of his invention."
The son of a farm labourer and market gardener, Muldoon was born in Co Armagh and took his degree at Queen's University, Belfast, where Seamus Heaney was a tutor. He now lives in the United States and teaches at Princeton.
The Annals of Chile is Muldoon's seventh collection. Dedicated to his schoolteacher mother Brigid, it ranges in tone from knockabout comedy to profound grief and includes a poem, The Birth, celebrating the arrival of his daughter.
Seven o' clock. The seventh day of the seventh month of the year No sooner have I got myself up in lime-green scrubs, a sterile cap and mask, and taken my place at the head of the table than the windlass-women ply their shears and gralloch-grub for a footling foot, then, warming to their task, haul into the inestimable realm of apple-blossoms and chanterelles and damsons and eel-spears and foxes and the general hubbub of inkies and jennets and Kickapoos ... Another poem, The Sonogram, explores the same subject: Only a few weeks ago, the sonogram of Jean's womb resembled nothing so much as a satellite-map of Ireland now the image is so well-defined we can make out not only a hand but a thumb; on the road to Spiddal, a woman hitching a ride; a gladiator inhis net, passing judgement on the crowd.