Siriporn's victory could see her walk free three years early
Samson Sor Siriporn, a convicted drug dealer, beat Japan's Ayaka Miyano in a bout staged at the mixed Klong Prem jail, known as the "Bangkok Hilton".
Watched by dozens of prison staff, Siriporn won on points after 10 rounds in the ring, kick-starting parole proceedings for her early release.
The 24-year-old took up boxing to protect herself from violent inmates.
"I'm so happy with the way I performed today. I'm very proud. I've been in jail for a long time now, I hope this will see me released early," said Siriporn after the fight.
"When I'm free I'll carry on fighting. I want to fight all over the world."
The match took place in a makeshift ring in the grounds of the Klong Prem prison, in front of a crowd of about 700 people, including a few prison inmates.
Siriporn, serving a 10-year sentence for selling small amounts of drugs, dominated the fight, taking the World Boxing Council title 97-93, 98-92, 100-91.
A Thai corrections department official said the parole process would start immediately.
"I think it's very likely she will be released as a result of this victory, maybe in a couple of months. We gave her a chance to show us her talent, and she has done that," said Natti Jitsawang.
"She is a changed woman, and now she has the chance to be free and fight around the world."Organisers believe the win makes Siriporn the first inmate to clinch a world title in prison.