Moss, 32, won out over two other finalists, Erin O'Connor and Alek Wek, at the British Fashion Awards.
"Kate Moss is a fashion icon and without doubt one of the most prolific models in the industry," the awards panel said in naming her the winner. "She has now been modeling for over 15 years and remains at the top of her game."
The British Fashion Council refused to comment on the potential controversy of Moss's nomination.
Moss lost contracts with H&M, Chanel, Gloria Vanderbilt and Burberry after the Daily Mirror newspaper published images of the model allegedly snorting cocaine with British rocker boyfriend Pete Doherty last year and dubbed her "Cocaine Kate."
After the pictures were published, Moss made a public apology and went to a drug rehabilitation clinic in Arizona. Prosecutors decided in June there was insufficient evidence to charge Moss.
Since then, she has made a huge comeback, appearing frequently in fashion magazines and winning back contracts.
Still, some say giving an award to someone whose career has been pocked by drug allegations sets a bad example.
"To me it's baffling ...," said Colombian Vice President Francisco Santos, speaking in Britain this week during an anti-drug campaign.
"Model of the Year" is an industry accolade for the British model who has contributed the most to the international fashion scene over the last year.
"She's the kind of survivor we all want to be," said Jeremy Baker, a fashion expert at London Metropolitan University. "The paradox is that since this time last year the scandal made her a lot better off."
Since the cocaine allegations, Moss has won more than a dozen contracts with names including Bulgari, Christian Dior, Rimmel cosmetics and perfume Coco Mademoiselle. She has also signed deals with cell phone brand Virgin Mobile and French luxury label Longchamp. Topshop also recruited her to create a new clothing and accessories range, which will be launched in spring 2007.
Magazines including British Vogue and Vanity Fair featured Moss on their front covers in August and September.
Leading press, buyers and industry figures chose the Model of the Year from a shortlist compiled by Vogue editor Alexandra Shulman and a committee.
There is no money attached to the award.
George Ruston, director of Hope U.K., a drug education charity, said the companies paying Moss and the council nominating her contribute to glorifying drug use.
"They're making decisions to reward the behavior," Ruston said. "I really don't think people should be making personal gain out of stuff that is causing lots of problems in the world. I think the responsibility partly lies with the people who are funding, using Kate Moss's notoriety for their own economic purposes."