Directed by Saudi Arabia's first female filmmaker, Haifaa al-Mansoor, and shot entirely in the ultra-conservative kingdom where cinemas are banned, the film won the "Muhr" award.
Ten-year-old Waad Mohammed, who plays the girl named Wadjda and who is also testing the boundaries of a woman's place in a highly conservative society where her love for Western music and fashions land her in trouble, bagged the best actress award at the festival.
"Being awarded at a festival in a Gulf country means a lot to me," said Mansoor, tears welling up in her eyes.
Born in 1974, Mansoor studied literature at the American University in Cairo and film at the University of Sydney.
Mansoor was often forced to direct what was her first feature film from a van with a walkie-talkie in some of the more conservative neighbourhoods where she could not be seen in public together with male crew and cast members.
In some areas she also had to face screaming local residents who would totally block her film's shooting.
The film also shows how Wadjda's mother is challenged by restrictions, as she must hire a driver to travel in the world's only country where women are banned from driving.
The film also shows how the mother, unable to give birth to more children, must silently accept the decision of her husband, under pressure from his family, to marry a second wife in order to have a son.
Egyptian film "Chaos, Disorder", by Nadine Khan -- daughter of director Moahmmed Khan -- won the Special Jury Prize in the festival that opened on December 9.
Turkish film "Yerlati" (Inside) by Zeki Demirkubuz, meanhwile, won Muhr award for the best Asia-Africa feature film.