Almost 30 years ago, his novel Midnight's Children saw off the competition to win the Booker Prize. Today, Sir Salman Rushdie did it again, beating all previous Booker winners including the Nobel laureates Doris Lessing, J.M. Coetzee and Nadine Gordimer to carry away a one-off literary award celebrating the Booker's 40th anniversary.

Midnight's Children, considered one of the most important works of the modern age, has been voted the greatest Booker Prizewinner in the history of the award.

While his epic story set against the Partition of India was chosen in 1981 by a select panel of literary figures, it has this time received the ultimate accolade — the public's vote.

The Best of the Booker was picked by ordinary readers, many of whom were not even born when Rushdie was writing it. At least half of the voters are under the age of 35.

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Yesterday, the 61-year-old Bombay-born author was in America, promoting his latest novel, The Enchantress of Florence, a story set in the 16th century.

Hearing the news, he said: “I'm absolutely delighted and would like to thank all those readers around the world who voted.

“It's very exciting and gratifying, the more so because so many of the voters were so young. I'm very happy to think that Midnight's Children continues to be relevant.”

Since the Booker Prize's inception in 1968, it has become one of literature's most illustrious awards. It has helped to make the international names of novelists such as Arundhati Roy and Yann Martel and confirmed the reputations of writers such as Iris Murdoch, who won in 1978 for The Sea, The Sea, and Kazuo Ishiguro, with The Remains of the Day in 1989.

Forty-one authors have won the prize since it launched in 1969 because, in 1974 and 1992, it was shared between two winners.

This time, a panel of judges whittled down the past winners to a shortlist of six. Sir Salman faced competition from Pat Barker's The Ghost Road (1995), a First World War story; Peter Carey's Oscar and Lucinda (1988), set in 19th-century Australia; Coetzee's Disgrace (1999), about a professor who seduces a student; Gordimer's The Conservationist (1974), which describes a white man's exploitation of his black employees; and J.G Farrell's The Siege of Krishnapur (1973), a story set in 1850s India.

Midnight's Children, a novel that challenges our understanding of history and nationhood, is believed to have been way ahead of its main contender, Coetzee's novel.

When it won in 1981, critics hailed it as one of the most important books to come out of the English-speaking world in this generation. When the prize celebrated its 25th anniversary in 1993 with a “Booker of Bookers”, it won then as well.

Although only his second novel, it remains his most highly regarded work of fiction. The author is best-known worldwide, however, for his 1988 novel The Satanic Verses. Perceived as blasphemous by much of the Muslim community, it brought about a death-sentence fatwa by Iran's Ayatollah Khomeini, forcing Rushdie to live most of the 1990s in hiding.

The bookies had little doubt that Midnight's Children would win again yesterday after seeing the initial shortlist drawn up by a panel of judges that included John Mullan, Professor of English at University College, London, and the biographer Victoria Glendinning as chairman.

Ladbrokes closed its Best of the Booker market with Sir Salman as its “red-hot favourite”. Nick Weinberg, its spokesman, said: “Midnight's Children dominated the betting throughout ... It's rare that one selection, in a literary market, is backed almost to the exclusion of the rest. But that's exactly what's happened here.”

Applauding the “enormous vitality of the writing”, Ms Glendinning, a biographer of Anthony Trollope, said: “The readers have spoken — in their thousands. And we do believe that they have made the right choice.”

Through libraries, reading groups, retailers and the internet, some 7,800 people registered their votes.

Ion Trewin, the prize administrator, said: “This is a literary book that each generation takes to its heart ... It demonstrates that it is one of the few books you can call a modern classic. It appeals to people across all shades of taste and political opinion.”

The value of the Booker goes well beyond the £50,000 cash prize. Sales increase dramatically.

Last year's winner, Anne Enright's The Gathering went on to sell more than 500,000 copies in the UK, US and Ireland. Until then, Mr Trewin said, “she'd never sold more than 10,000 in her life”.

Jonathan Ruppin, Promotions Manager at Foyles bookshop, said of the winner: “He's not to everyone's taste, but from a bookseller's point of view, authors who get books into the news are always welcome.”

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