Warrington opened a cut above Selby's right eye in the second round and while the Welshman complained about a clash of heads, the Leeds fighter dominated throughout with Welshman Selby never looking like defending his title.
After opening up another cut above Selby's opposite eye in round five, Warrington was then confirmed the new world champion on points despite judge Alan Davis having the fight 115-113 in favour of Selby.
But the other two judges had Warrington in front 116-112 and 115-113 meaning the Yorkshireman was deservedly crowned IBF world champion amid wild scenes at Elland Road.
"What an occasion. What a night," said Warrington. "It's a fairytale ending."
"I always had respect for Lee (Selby). There was a lot of animosity but I said to him after the bell - what's done is done. We'll hopefully leave it at that.”
Warrington admitted he felt nervous ahead of the fight, knowing that so many fans had turned out to see him at his beloved Elland Road.
“I got into this ring tonight with the expectation of this city on my shoulders,” he added.
“I’m overcome with emotion. We worked on game plans but that all went out of the window and it was sheer grit and determination and this crowd got me through.”
Another domestic dust-up may loom for Warrington as the winner of this bout had been heavily linked with Northern Ireland’s Carl Frampton, whose next fight has been slated for Windsor Park later this summer.
Frampton - who, like Warrington, is promoted by Frank Warren - was ringside to witness the unexpected result.
Warrington added: “I said to him two weeks ago, ‘I’m going to beat Lee Selby then I’ll come to Windsor Park’.
“We love an away day, me and the boys, so we’ll turn up wherever, but first things first, I need to sit down with my manager and Frank and then we’ll get the fight sorted.”
Earlier on, Leeds golden girl Nicola Adams defeated Soledad Del Valle Frias in the first round of their international flyweight contest.
Unbeaten Adams looked a class apart to her Argentinian opponent within the first few seconds and Frias crumbled to the canvas following another powerful hit by Adams towards the end of the contest’s first round. The Argentinian fighter was in no state to continue and was stopped as double Olympic gold medallist Adams easily recorded the fourth victory of her professional career. Adams hopes to win all four of her weight’s titles in the next two years and said: “This was unbelievable.
“To be able to perform in front of such a big crowd was amazing.”
As part of a superb evening for Yorkshire fighters, Bradford’s Darren Tetley became the new WBO welterweight European champion.
Following earlier victories for Yorkshire trio Jack Bateson, Jack Daniel and Reece Mould, Tetley’s opponent Mason Cartwright was stopped in the ninth round after a severe laceration to the mouth.
Cartwright was visibly upset by the doctor’s decision after earlier looking in control of the fight but Tetley fought back to turn the fight on its head.
Earlier, Doncaster fighter Mould first of all defeated Arnoldo Solano an in international featherweight contest before Leeds puncher Daniel stopped Latvia’s Zigurds Kraukalis in the first round of their super-featherweight bout.
Mould won every round to record a victory on points to take his record to ten wins from ten fights with five knock-outs while Daniel quickly settled his bout to make it a perfect three from three as a professional with his second knock-out.
Fellow Leeds fighter Bateson then also beat Jose Hernandez in their super-bantamweight bout, outpointing his opponent 40-36 to also maintain his perfect record as a professional.
Doncaster’s Adam Jones lost out on points to Scotland’s Willy Hutchinson in a middleweight contest.