A clinical trial of the new drug was brought to an early close after "remarkable" results showed a better survival rate compared to the current best treatment, experts said.
Early results showed a 20% reduction in death from cardiovascular causes.
Researchers claim the new compound, named LCZ696, can replace enalapril as the first-choice treatment for heart failure.
Co-leader of the trial, Professor John McMurray of the University of Glasgow, said: "We have what we believe is a much more effective replacement for one of the gold standard drugs for the treatment of heart failure. This is a major advance in the treatment of this terrible problem."
Heart failure occurs when it has been damaged, perhaps by a heart attack, and cannot pump blood around the body as effectively as it used to.
The body responds to the low flow of blood by producing hormones such as angiotensin II and noradrenaline. But these hormones constrict blood vessels and actually make it harder for the failing heart to squeeze blood into them.
Over time, the constant production of these hormones further damages the heart, blood vessels and kidneys.
Enalapril works by blocking or inhibiting these hormones and therefore slows down or even reverses the progressive worsening of the condition, experts said.
Prof McMurray said LCZ696 has a similar impact but also has additional benefits.
"What this new drug LCZ696 does is simultaneously inhibit the bad hormones - like enalapril - but in addition boosts the production of beneficial hormones," he said.
"Several of these beneficial substances stimulate the kidneys to produce more urine, to excrete sodium and water, and act to relax blood vessels. All of these actions unload the failing heart.
"By having this dual effect LCZ696 had extra beneficial actions compared with enalapril and in this way improved patient outcomes."
The University of Glasgow said the trial saw more than 8,400 patients with heart failure given either 200mg twice daily of LCZ696 or 10mg twice daily of enalapril, in addition to recommended therapy, in a bid to compare mortality and hospitalisation rates.
Early results showed that 914 (21.8%) of patients in the LCZ696 group died of cardiovascular causes, compared with 1,117 (26.5%) in the enalapril group.
A further 711 (17%) of patients receiving LCZ696 and 835 (19.8%) of those receiving enalapril died of any cause.
This represented an 20% reduction in death from cardiovascular causes and a 16% reduction in death from any cause for those in the LCZ696 group.
The new compound also reduced hospitalisation for heart failure by 21%, experts said.
The "emphatic" results prompted researchers to bring the trial to an early close after 27 months.
Co-author of the study, Professor Milton Packer of the University of Texas Southwestern Medical Centre, described the "magnitude of the advantages" of LCZ696 as "highly statistically significant and clinically important".
Professor McMurray added: "Compared with our current gold-standard treatment enalapril ... LCZ696 made patients live longer, stay out of hospital and feel better, fulfilling all our goals of treatment.
"This is a remarkable finding and strongly supports using this new approach instead of an ACE inhibitor or ARB in the treatment of chronic heart failure."
The findings have been outlined in the New England Journal of Medicine.