Iranian revenge thriller It Was Just An Accident wins Palme d'Or at Cannes
Cate Blanchett presented the award to Panahi, who three years ago was imprisoned in Iran before going on a hunger strike.
The crowd rose in a thunderous standing ovation for the filmmaker.
On stage, Panahi said what mattered most was the future of his country.
'Let us join forces,' Panahi said. 'No-one should tell us what kind of clothes we should wear, or what we should or shouldn't do.'
The win for It Was Just An Accident extends one of the most unprecedented streaks in movies – the indie distributor Neon has backed the last six Palme d'or winners.
Cate Blanchett at the 78th international film festival in Cannes (Lewis Joly/Invision/AP)
Neon, which acquired It Was Just An Accident for North American distribution after its premiere in Cannes, follows its Palmes for Parasite, Titane, Triangle of Sadness, Anatomy Of A Fall and Anora.
The Cannes closing ceremony followed a major power outage that struck south-eastern France on Saturday in what police suspected was arson.
Only a few hours before stars began streaming down the red carpet, power was restored in Cannes.
The Grand Prix, or second prize, was awarded to Joachim Trier's Norwegian family drama Sentimental Value, his lauded follow-up to The Worst Person In The World.
Kleber Mendonca Filho's Brazilian political thriller The Secret Agent won two big awards, best director for Fihlo and best actor for Wagner Moura.
Director Joachim Trier accepts the grand prix for Sentimental Value (Joel C Ryan/Invision/AP)
The jury prize was split between two films, Oliver Laxe's desert road trip Sirat and Mascha Schilinski's German, generation-spanning drama Sound Of Falling.
Best actress went to Nadia Melliti for The Little Sister, Hafsia Herzi's French coming-of-age drama.
The Belgian brothers Jean-Luc and Pierre Dardennes won best screenplay for their latest drama, Young Mothers. The Dardennes are two-time Palme d'Or winners.
Cannes' award for best first film went to Hasan Hadi, for The President's Cake, making it the first Iraqi film to win an award at the festival.
Saturday's ceremony brings to a close a 78th Cannes Film Festival where geopolitics cast a long shadow, both on screen and off.
Nadia Melliti accepts the award for best actress for the film The Little Sister (Joel C Ryan/Invision/AP)
Shortly before the French Riviera extravaganza, which is also the world's largest movie market, US President Donald Trump floated the idea of a 100% tariff on movies made overseas.
Most filmmakers responded with a shrug, calling the plan illogical.
'Can you hold up the movie in customs? It doesn't ship that way,' said Wes Anderson, who premiered his latest, The Phoenician Scheme, at the festival.
That was one of the top American films in Cannes, along with Spike Lee's Highest 2 Lowest, the Christopher McQuarrie-Tom Cruise action film Mission: Impossible – Final Reckoning, and Ari Aster's Eddington.
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