The trans-Tasman bid was up against Colombia, which was reportedly argued by UEFA, the powerful ruling body of European football, as the better place to help drive change for women's football.
But Australia and New Zealand received the highest score in FIFA's technical evaluation – earning 4.1 out of five in the report compared to Colombia's 2.8.
The joint bid was also considered more commercially lucrative – a compelling factor for FIFA.
Football Ferns captain Ali Riley shared an emotional photo of herself on Twitter with tears in her eyes.
"To lead the Football Ferns in a home FIFA Women's World Cup in New Zealand will be truly special and inspire a new generation of Football Ferns," she said.
Bleary-eyed fans who stayed up to watch the announcement described the news as "overwhelming".
"Not often I'm awake and in tears at 2am, but this did it and these are happy tears," one woman wrote on Twitter.
"In disbelief over how far we've come. From having to beg to be allowed to play a 'boy's sport' to getting the 2023 FIFAWWC. This means everything and it's almost overwhelming."
"Unbelievable places, full of amazing people! This one will be epic. Congratulations ... let the dreaming commence," another wrote.
"The opportunity to play in a home FIFA Women's World Cup is something every footballer dreams of and I am looking forward to seeing those dreams come true," Matildas captain Samantha Kerr said.
"Playing for the Matildas in Australia will be the highlight of my career and an opportunity to inspire girls, both in Australia and New Zealand, and all over the world to play football.
"We have seen great progress in the women's game and Australia-New Zealand will take the game to a whole new level."