The five-time champion, Caltech, dropped to second place, swapping places with the elite UK university, while the rest of the top 10 positions remained unchanged from last year.
Top 100 world universities 2016/17 – THE rankings
Overall, the UK takes 91 of the top 980 places in the 13th annual Times Higher Education rankings; 88 of these make the top 800 compared with 78 last year.
It is second only to the US for the number of world-class universities featured in the top 800. Within the top 200, the UK has 32 representatives – two less than last year.
Phil Baty, editor of the rankings, said: "It is fantastic news that the University of Oxford has topped the World University Rankings for the first time. It is a great result for the UK higher education sector and cements its position as one of the greatest university nations in the world.
"However, the UK will have to watch out for Asia’s continuing ascent. Although the notion of Asia as the ‘next higher education superpower’ has become something of a cliché in recent years, the continent’s rise in the rankings is real and growing.