Luciano Rodriguez scored the winning goal in the 86th minute in a header from close range, giving Uruguay a much-deserved victory after dominating the entire match against Italy.
More than 40,000 people, mostly cheering for Uruguay, attended the match at the Diego Maradona Stadium. FIFA President Gianni Infantino was also present.
Italy's Cesare Casadei, the top tournament's top scorer with seven goals, had a disappointing performance in the final.
Neither Uruguay nor Italy was among the favorites when the U20 World Cup kicked off on May 20, but unlike Brazil, Argentina and England they faced less resistance from clubs about releasing players for the tournament.
It is not mandatory for clubs to allow their players to take part in international youth competitions.
Uruguay lost the final of the tournament in 1997 and 2013. Brazil was the last winner from South America in 2011.
The title for the Celeste comes in the wake of Argentina's World Cup title in December, which also ended a sequence of wins by European teams.
