In a nail-biting finale to the skeleton competition in Sochi, Yarnold beat American Noelle Pikus-Pace into second place, beating her time by just over a second.
The 25-year-old’s win was Britain’s second medal of the Olympics and the country’s tenth gold in Winter Games history.
Britain’s reigning world champion Shelley Rudman, who won silver at the 2006 Olympics, finished 16th.
Yarnold, of Kent, smashed the track record in her third run and did enough on an imperfect final run to clinch victory.
“I’m just so chuffed I’m Olympic champion,” she said.
“I don’t think it’s going to sink in for a long time. The fourth run, I was totally relaxed and went out and enjoyed it. It was a bit of a messy run but I’m thrilled to get here after working so hard for the past five years, which makes it all worth it.
“I’m pleased that I could show the world what I’m capable of. I wanted to do myself justice and I can’t believe I did it.
“As an athlete, you do so much hard work, but it’s worth it for days like this.”
“It’s also lovely as it’s Valentine’s Day, so it has something romantic about it as well.”
The athlete celebrated after her victory by running towards British fans in the crowd waving a Union flag and beaming with delight.
Her success means British skeleton maintained its proud tradition of securing a medal in each of the six Olympic Games in which the sport has featured, dating back to 1928.
The skeleton began in Switzerland as a spin-off of the British sport Cresta sledding. Lying face down, the “slider” uses their body to steer and experiences forces of up to 5g while travelling at more than 80mph.
The Yarnie Army – the Olympian’s parents Clive and Judith, sisters Katie and Charlotte, boyfriend James Roche, who is a sled technician with the British bobsleigh team – had travelled to Russia to lend their support.
They could not hide their emotions as they watched the sportswoman triumph.
The Olympic winner said: “My mum and dad and my sisters are here and I couldn’t have done it without them.”
Yarnold went into the final two runs at the Sanki Sliding Centre with a 0.44 second advantage over Pikus-Pace, following a commanding performance on Thursday.
Her overnight lead had cemented her status as the strongest British favourite for a Winter Olympics gold since skaters Jayne Torvill and Christopher Dean triumphed in Sarajevo 30 years ago to the day.
But victory was not assured, with the home favourite Elena Nikitina a particular threat, having trailed the British hopeful by only 0.05 seconds after the first heat before a knock during her second run bumped her into third place.
Yarnold’s run left her 0.78 of a second clear of Pikus-Pace going into the final run. The victory makes her the fourth consecutive British woman to win an Olympic medal in the skeleton after Alex Coomber (2002), Rudman (2006) and Amy Williams, who scooped gold in 2010.
The Olympic victory is the icing on the cake after a dominant world cup season that saw her win the overall title with four wins and three more podium finishes from eight races.