Smith — best known as a short-story writer — won the best novel category Tuesday for her first full-length novel, the tale of an enigmatic young woman who disturbs a family's uneventful holiday in an English town.
Finalists included Nick Hornby's "A Long Way Down" and Salman Rushdie's "Shalimar the Clown."
The panel of judges described the book as "a glorious work of fiction that inspired both laughter and sadness and that none of us could stop reading."
Smith, 43, said it was "as great a surprise to have reached its final list as it was to be listed at all, especially on such a tough and wide-ranging shortlist and in a year when there's been such strong fiction.
"I still can't quite believe it. I've been very lucky," said Smith, who has twice been shortlisted for the Booker Prize.
The Whitbread prizes are awarded in five categories — novel, first novel, poetry, biography and children's book.
Each category winner receives $8,700. One of the five will receive the $43,000 Whitbread Book of the Year Award on Jan. 24.
The first novel award went to Malaysian-born Tash Aw for "The Harmony Silk Factory," set in his native country in the 1930s and 40s.
Christopher Logue won the poetry category for "Cold Calls," a modern reworking of Homer's "Iliad." Hilary Spurling took the biography prize for "Matisse the Master," while Kate Thompson's "The New Policeman" won the children's book award.
British retail and leisure group Whitbread Group PLC announced last year that it would no longer sponsor the prizes, which were founded in 1971 and are open to residents of Britain and the Republic of Ireland. A search is underway for a new backer.