The 41-year-old musician - who had long been the bookies' favourite - triumphed with her release Let England Shake, which was inspired by conflicts in Iraq and Afghanistan.
Polly Jean Harvey beat acts such as chart-topper Adele and Brit-winning star Tinie Tempah to the £20,000 prize.
She previously won the Mercury Prize a decade ago - on the day of the September 11 attacks.
Harvey wore a full-length white dress with a white leather bodice shaped like a strait-jacket - the design of which had been inspired by her album - to attend the ceremony at London's Grosvenor House Hotel.
Collecting the prize she said: "Thank you for the recognition of my work on this album.
"It's also good to be here this evening. When I last won 10 years ago on September 11, 2001, I was watching the Pentagon burning from my hotel window.
"So much has happened since then. This album took me a long time to write. It was very important to me. I wanted to make something meaningful, not just for myself but for other people, and hopefully to make something that would last."
The album features graphic lyrics about warfare, as well as allusions to other songs and unusually includes the prominent use of an autoharp, played by Harvey.
Speaking backstage, she said she was "delighted and really happy" to have won.
Describing her first victory on September 11, she said: "Ten years ago feels like such a surreal experience, I'm sure for everybody, that my only memory of that day really is of being in my hotel room and seeing the Pentagon burning.
"I felt so separate from the prize that was being given here at that time and I'm sure it must have felt very odd for all the people that were here so today to have the chance again to be here and actually receive the award means a great deal to me."
The singer said she had not thought what she would do with the prize but revealed she is already working on her next project.
She said: "I'm a writer that works all the time, I write every day so already my work has started to develop into what will be the next project." -06 Sep 2011