The actress made her name in the 1987 classic Dirty Dancing, opposite Patrick Swayze, and she donned her dance shoes once again for the celebrity showdown after years away from the spotlight.
She saw off competition from actor Kyle Massey and politician Sarah Palin's daughter Bristol during the show's finale on Tuesday night (23Nov10).
Palin came third in the competition after gaining the least amount of votes, leaving Grey and her dance partner Derek Hough to battle it out with Massey for the title.
Grey scored a perfect 30 for her Viennese Waltz and a 28 for her Cha Cha - her final dances on Tuesday's show.
After winning, the star revealed she nearly pulled out of the finale after rupturing a disc in her spine on Monday night (22Nov10), prompting a brief hospital visit. Grey has been plagued with injuries throughout the competition after undergoing a string of spinal surgeries to repair torn ligaments in her neck.
With her actress pal Jamie Lee Curtis and Cabaret star dad Joel Grey looking on from the studio audience, she admitted, "I didn't think I was going to compete tonight and I'm really glad I did."
Other celebrities who took part in the 11th season of the show included David Hasselhoff, Michael Bolton, R&B singer Brandy, veteran actress Florence Henderson, Jersey Shore star Mike Sorrentino and Vanessa Williams' ex-husband Rick Fox, Audrina Patridge, comedienne Margaret Cho and retired football star Kurt Warner.