The Allotment Roof shed - built in north London by Joel Bird - beat off an outdoor disco and cosy mini-pubs to take the annual award, which attracted 2,000 entries.
The winner, which includes solar lighting and a wood-burning stove, was announced in a Channel 4 programme last night, hosted by architect George Clarke.
Mr Bird, 39, who has a business building bespoke sheds, grows an array of veg on top and uses the main space for a studio to paint and make music. He collected £1,000 for his win from sponsor Cuprinol.
He said: "Sheds are no longer just places for men to escape to, they are transforming the way people live their lives and subsequently how they see themselves. I'm hoping to use the award to promote the benefits of a more sustainable life."