 |  The Coen brothers previously won Oscars for Fargo  |
Javier Bardem also won best supporting actor for his role as a hitman in the film, thanking his family in Spanish.
All of the acting prizes went to Europe, with UK stars Daniel Day-Lewis and Tilda Swinton named best actor and best supporting actress respectively.
France's Marion Cotillard earned the best actress prize for La Vie En Rose.
"I'm speechless now," said Cotillard, who played legendary torch singer Edith Piaf in the movie.
"Thank you life; thank you love. It is true there are some angels in this city."
Day-Lewis, who picked up his Oscar from Dame Helen Mirren, joked it was "the closest I'll ever come to getting a knighthood". 
No Country For Old Men
Daniel Day-Lewis (pictured)
Marion Cotillard
Javier Bardem
Tilda Swinton
It was the 50-year-old's second Academy Award, having been recognised for My Left Foot in 1990.
Elsewhere at the ceremony, exotic dancer-turned-scriptwriter Diablo Cody took best original screenplay for the quirky, verbose comedy Juno - her first ever movie.
"I'm shocked by the popularity of the film," she said.
"I mean, when you write basically an independent movie about, you know, a pregnant teenager and you make it for seven million dollars you never, ever think it's going to become this phenomenon."
Birthday
The ceremony, at the Kodak Theater in Hollywood, marked the 80th anniversary of the Academy Awards. 
Organisers celebrated "Oscar's birthday" with film montages celebrating past winners and memorable Oscar moments - including the streaker who ran behind David Niven during 1974's ceremony.
However, this year's understated show was unlikely to provide many clips for future compilations.
It was put together in just a matter of weeks after the writers' strike - which had threatened to force the cancellation of Hollywood's biggest night - was called off.
That meant there were no large-scale song-and-dance numbers or lovingly-crafted movie spoofs from host Jon Stewart.
Returning for his second stint at the helm of the awards show, Stewart acknowledged the impact of the strike on Hollywood. 
"These past three and a half months have been very tough. The town was torn apart by a bitter writers' strike," he said.
"But I'm happy to say that the fight is over. So tonight, welcome to the make-up sex."
Batman joke
No Country For Old Men, a dark comedy about a drugs bust gone wrong, had long been the frontrunner to win best film.
Its win cements the reputation of the Coen siblings as Hollywood's favourite leftfield film-makers.
Accepting their award, older brother Joel recalled that the duo had been making films since childhood.
"What we do now doesn't feel that much different from what we were doing then," he said. 
"We're very thankful to all of you out there for continuing to let us play in our corner of the sandbox."
Tilda Swinton gave the most spirited speech of the night while picking up her best supporting actress award.
"I have an American agent who is the spitting image of this," she said, referring to her Oscar statuette.
"Really, truly. The same shape head and, it has to be said, the buttocks."
She also poked fun at her Michael Clayton co-star George Clooney, by referring back to his critically-derided stint as superhero Batman.
"Seeing you climb into that rubber batsuit from Batman and Robin, the one with the nipples, every morning under your costume, on the set, off the set, hanging upside-down at lunch... You rock, man."
Parties
One awkward moment came as musical duo Glen Hansard and Marketa Irglova ran out of time during their acceptance speech for most original song. 
Hansard, who sings for Irish band The Frames, had just finished his thank-yous and stepped aside for petite Irglova to make her speech when the orchestra struck up, forcing her off stage.
After a commercial break, Irglova was invited back to rapturous applause from the audience.
"The fact that we're standing here tonight, the fact that we're able to hold this, it's just proof that no matter how far out your dreams are, it's possible," she said.
With the main ceremony over, a question mark still lingers over the glitzy post-Oscars parties. The high-profile Vanity Fair bash was cancelled during the writers' strike.
Other casualties included People magazine's party, and that of socialite Dani Jannssen, whose annual gathering attracts the likes of Jack Nicholson and Clint Eastwood.
However, pop stars Madonna and Prince have stepped into the breach with hastily-arranged parties in their Hollywood homes.
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