The film, "Tropa de Elite"("Elite Squad") has been a box-office hit in Brazil and was chosen on Saturday, Feb. 16, by an international jury headed by renowned Greek-born director Costa-Gavras. It beat out productions from Britain and Hollywood for the Berlin festival's top honor.
"It is a prize for Brazilian film," said Padilha whose movie tells the story of a brutal police clean-up operation ahead of a 1997 visit to Brazil by Pope John Paul II.
Wearing a red Berlinale scarf, Padilha said winning the award would encourage him to continue to make critical films success in Berlin coming against the backdrop of a renewed international recognition of Latin American cinema.
With no script and his actors largely improvising, Padilha hoped to give his movie a documentary film, he said.
The film has come under criticism for glorifying police brutality in Rio de Janeiro's slums. It's criticism that is misplaced and often coming from viewers who didn't understand the film, Padilha said.
"The film aims to explain how the state turns policemen either into corrupt people ... or worst of all violent people," the 40-year-old director told reporters. "The huge majority of Brazilians understand that. I don't think it's mysterious."
Costa-Gavras said the jury's decision to award the Golden Bear to Padilha was a unanimous decision.
Two awards for "There Will Be Blood"
The Berlinale's jury grand prize went to US Oscar-winning documentary filmmaker Errol Morris' "Standard Operating Procedure," a detailed examination into the shocking events surrounding Iraq's Abu Ghraib prison.
A total of 21 films were competing for the festival's top honors this year with "There Will Be Blood" from US director Paul Anderson winning two awards -- one for best director and for one for Jonny Greenwood for his musical score for the film.
"There Will Be Blood," which stars Daniel Day-Lewis as a ruthless oilman has been nominated for eight Academy Awards, which are to be presented in Los Angeles next week.
But holding the two silver bears, Anderson said, "That's enough for me." Anderson won a Golden Bear for "Magnolia" eight years ago.
Some 400 films screened
Now in its 58th year, the Berlinale is one of the world's top three film festivals. Saturday's Berlinale awards were handed out in a Hollywood-style gala ceremony.
It has also been a successful festival for Iranian cinema with one of the nation's leading actors Reza Najie winning the Berlin Film Festival's top award for best actor.
He played a stressed-out father trying to keep his family financially afloat in Iranian director Majid Majidi's light poignant comedy "The Song of Sparrows" ("Avaze Gonjeshk-Ha").
It was also announced Saturday that Iranian-born director Hana Makhmalbaf's "Buddha Collapsed out of Shame" ("Buda Az Sharm Foru Rikht") had won the 23rd film peace prize. The prize is valued at 5,000 euros ($7,337).
Makhmalbaf's movie screened in the Berlinale's Generation section, which is aimed at younger audiences, and focuses on a young Afghan girl who lives in the mountains near the place where the 1,500-year- old Buddha statues were blown up by the Taliban in 2001.
British actress Sally Hawkins goes home with the festival's award for best actress for her role in British director Mike Leigh's "Happy Go Lucky" about a positive-thinking Londoner called Poppy.
Speaking after accepting the festival's Silver Bear, Najie said it was his destiny to come to Berlin. "Thank you Berlin, thank you cinema," he told the awards ceremony in the German capital.
Hawkins said she had been completely overwhelmed after receiving the prize and had burst into tears after leaving the stage.
The Silver Bear for best script went to Chinese director Wang Xiaoshuai's "In Love We Trust" ("Zuo You") about the tensions caused by a sick child.
Earlier Saturday, the festival announced that "Lemon Tree" from Israeli director Eran Riklis won the audience prize for one of the Berlinale's main sections.
Riklis' film was not included in the Berlinale's main competition but was screened in the festival's Panorama section, which showcases independent and art-house cinema.
The 11-day Berlinale screened nearly 400 pictures and attracted 20,000 accredited visitors from 125 countries. It concludes on Sunday with repeat showings of some of the festival's most popular films.