Mr Sarwar collected the award, along with the prize for Donald Dewar Debater of the Year, in a ceremony at Edinburgh’s Prestonfield House Hotel.
The pandemic meant it was the first time the event, which is organised by The Herald newspaper, had been held in three years.
Mr Sarwar had been up against First Minister Nicola Sturgeon – who has won the award a record five times – and Scottish Green co-leaders Patrick Harvie and Lorna Slater, who were nominated after they took the Scottish Greens into government as part of a partnership deal with the SNP.
Collecting the award, which was given in recognition of his work to transform Scottish Labour, he said he “really wasn’t expecting that”.
But he said: “I love this job, I love the Labour Party, and I love Scotland, and it is a huge honour to do this.”
He thanked party colleagues, staff and fellow MSPs for their “incredible support and encouragement” since he became Scottish Labour leader in February 2021.
And while Labour moved into second place in this year’s council elections under his leadership, Mr Sarwar stated: “I don’t aspire for second place, I aspire for first place. Change is coming.”
The last time a Labour politician won the title was in 2010, when the honour went to Hugh Henry, for his work with Holyrood’s Public Audit Committee.
This year, Labour’s Richard Leonard was named as Committee MSP of the Year for his role as convener of the Public Audit Committee which probed the problems with the delivery of two new CalMac ferries.
Labour MSP Paul Sweeney meanwhile collected the honour for Community MSP of the Year for his efforts to tackle drugs deaths in Glasgow – work which has seen him team up with campaigner Peter Krykant, who set up a safe consumption facility in a converted ambulance
And Councillor Stephen McCabe, the leader of Inverclyde Council, made it a fifth award for Scottish Labour after he was named Scottish Local Politician of the Year.
Former lord advocate Lady Elish Angiolini meanwhile was honoured with a lifetime achievement award in recognition of public service.
She was the first woman to be named as lord advocate when she took on the role in 2006. After leaving that post in 2011 her work has seen her lead an investigation for the Scottish Government
into practices at crematoria following the Mortonhall baby ashes scandal, as well as producing a report for the UK Government into deaths in police custody.
Lady Angiolini,said: “This is a truly fantastic honour, it is a really profound honour for me.”
The Public Campaign of the Year award was presented to Back Off Scotland, together with Green MSP Gillian Mackay for their efforts to establish buffer zones at abortion clinics.
The Back Off Scotland group has worked to publicise the impact protests outside facilities can have on both patients and staff, while Ms Mackay is bringing a member’s bill to Holyrood in a bid to prevent demonstrations from taking place near clinics- with Ms Sturgeon having already pledged the Scottish Government will support this.
The SNP’s Neil Gray collected the One to Watch award after joining the Scottish Government in January this year.
His brief, as minister for culture, Europe and international development, has seen him given responsibility for Government efforts to support Ukrainian refugees in Scotland.
Fellow SNP politician Stewart McDonald was named the Best Scot at Westminster for his work as the party’s defence spokesperson at Westminster
Elsewhere business, trade, tourism and enterprise minister Ivan McKee collected the Politics in Business Award, while Scottish Conservative MSP Dr Sandesh Gulhane was named as E-Politician of the Year, after establishing a weekly podcast.