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Vettel was demoted to second after being slapped with a five-second penalty for a dangerous re-entry after running off the track.
Ferrari's Sebastian Vettel was runner-up, ending Mercedes's run of five successive one-two finishes, with Hamilton's team mate Valtteri Bottas third.
The Briton took an extra point for the fastest lap of the race.
The win around the streets of capital Baku was the fifth of Bottas’ career and he became the first driver this season to win from pole.
The win was the 75th of Hamilton's career, second in a row after his lucky triumph in Bahrain two weeks ago, and sixth in China.
Hamilton is now 17 wins short of Michael Schumacher's all-time record of 91.
Starting second behind pole-sitter Hamilton, Bottas got the jump on the Briton during a typically messy start at Albert Park and ended up cruising to his fourth win by some 20.80 seconds after delaying a tyre-change.
The win was the 72nd of Hamilton's stellar career.
Hamilton had needed only five points to be sure of the title while four times champion Vettel had to win to have any hope of denying the Briton.
The Briton stands on the brink of becoming only the third man to win at least five titles, with his team's stranglehold on both championships tighter than ever after he won Sunday's Japanese Grand Prix.