Vince Young ran eight yards for a touchdown on fourth down with 19 seconds left as Texas beat USC 41-38 to win the Rose Bowl in Pasadena.
Second-ranked Texas won their first US college football title since 1970 and ended USC's bid for a third straight national championship.
The Longhorns took their winning streak to 20 games and broke USC's run of 34 victories, stretching back to 2003.
"We couldn't stop them," said USC coach Pete Carroll.
"The quarterback ran all over the place."
Young, who finished runner-up as college player of the year to USC's Reggie Bush, was named Most Valuable Player after completing 30 of 40 passes for 267 yards and rushing 20 times for 200 yards.
"It's so beautiful," said quarterback Young as he received the MVP trophy. "Don't you think that's beautiful? It's coming home all the way to Austin, Texas."
Young became the first player in NCAA history to pass for 2,500 yards and rush for 1,000 in the same season.
Texas trailed 38-26 after a 22-yard touchdown pass from 2004 Heisman winner Matt Leinart to Dwayne Jarrett with 6:42 remaining.
But Young scored on a 17-yard run with 4:03 left to bring Texas to within five points.
A USC penalty handed Texas a first down with two minutes left and Young marched the Longhorns back inside the 10 before running in for the winning score.
Young then ran in on the ensuing two-point conversion for a three-point winning margin after USC used its final timeout.