The 24-year-old aspiring physician beat contestants from 49 other states, the US capital city's District of Columbia, the Virgin Islands and Puerto Rico to win the coveted crown in Atlantic City, New Jersey late Sunday.
In second place was Miss California Crystal Lee, who earned a $25,000 scholarship.
But racist slurs abounded on Twitter over the win by Davuluri, who performed a classical Bollywood fusion dance for the talent portion of the competition. Many wrongly described the beauty queen, who is believed to be a practicing Hindu, as an Arab who looks like a terrorist.
A user with the handle @emi_adkins said "It's called Miss America. Get outta here New York you look like a terrorist. #bye #americanforamerica."
Lue Brasili exclaimed "9/11 was 4 days ago and she gets miss America," while user Karl Sharro said "Al-Qaeda influenced the liberal judges."
Others, like the Jezebel feminist blog, denounced the comments, saying "racists are being racist because Miss America isn't white."
"This world is so ignorant. #MissAmerica Indian or not had every right to gain the title of MissAmerica. This is why I want to leave America!" chimed in @CJlovebug.
Davuluri competed on the platform issue of "celebrating diversity through cultural competency."
During her 2014 year of service as Miss America, she will travel about 20,000 miles (32,190 kilometers) each month to speak to audiences about her chosen issue.
The University of Michigan honor student will also serve as the official national goodwill ambassador for the children's charity group Children's Miracle Network Hospitals.
Along with her much-prized title, Davuluri won a $50,000 scholarship to pursue her education.