The 82-year-old Australian writer was named winner of the Stg50,000 ($A100,300 prize at a ceremony in London for How to End a Story.
Journalist Robbie Millen, who chaired the prize jury, said Garner was the unanimous choice of the six judges.
Millen said the judges were captivated by the sharp observation and "reckless candour" of Garner's book, which covers her life and work between 1978 and 1998.
He said it is "a remarkable, addictive book. Garner takes the diary form, mixing the intimate, the intellectual, and the everyday, to new heights.
"There are places it's toe-curlingly embarrassing," he said. "She puts it all out there."
Garner's 800-page opus is the first set of diaries to win the prize, which was founded in 1999 and recognises English-language books in current affairs, history, politics, science, sport, travel, biography, autobiography and the arts.
She beat five other finalists, including biographies of poet Alfred, Lord Tennyson and writer Muriel Spark and books about 1970s revolutionaries, European wolves and the history of slavery in the Muslim world.
Millen said Garner ranked alongside those of Virginia Woolf in the canon of great literary diarists.
Garner's 1977 first novel Monkey Grip – the semi-autobiographical story of a single mother in bohemian inner-city Melbourne – is considered a modern Australian classic.
Her work includes the novella The Children's Bach, several short story collections, screenplays including The Last Days of Chez Nous and true crime books including This House of Grief, which Garner fan Dua Lipa chose this year for her monthly book club.
The British singer said Garner's work was a thrilling discovery. "She's one of the most fascinating writers I have come across in years," she said.
Garner is co-author of The Mushroom Tapes: Conversations on a Triple Murder Trial, a book about convicted triple murderer Erin Patterson.
Garner is less well known outside Australia, with US and UK publishers only recently publishing many of her books.
"It has taken us a long while to work out how good she is," Millen said. "Finally her status is being recognised, and I hope this will cement it."
Garner is the second Australian in a row to win the Baillie Gifford prize. The 2024 winner was Tasmanian writer Richard Flanagan for his genre-bending memoir Question 7.
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