Canon Joanna Penberthy said she is "immensely humbled" to become the 129th Bishop of St Davids in Pembrokeshire.
An electoral college of 47 people from across Wales spent two days locked in St Davids Cathedral before coming to their decision.
Canon Penberthy, 56, who was appointed the cathedral's first woman canon in 2007, will take over the role from the retiring Wyn Evans.
The decision to allow women bishops was made following a landmark vote in September 2013.
The Archbishop of Wales, Dr Barry Morgan, called it "an historic moment" for the church.
"What is really important to stress is that Joanna wasn't elected because she was a woman but because she was deemed to be the best person to be a bishop," he said.
"She has considerable gifts - she is an excellent preacher and communicator, can relate to all sections of the community, is a warm, charismatic, caring priest and someone who is full of joy."
Women bishops are also allowed in Scotland, Northern Ireland and England, where plans were formally approved in November 2014.
The first woman in England  the Right Reverend Libby Lane, was made Bishop of Stockport in January 2015.
St Davids' new bishop was educated at Newnham College, Cambridge and St John's College, Nottingham, she undertook ordination training at Cranmer Hall, Durham, in 1983.
Canon Penberthy was then a Deaconess in the city, before working in the role in Cardiff between 1985 and 1989.
She also served as a non-stipendiary minister in Cardiff, St Asaph and St Davids, between 1987 and 1995.
In February 2007, while vicar of Cynwyl Gaeo, Llansawel and Talley, she became the first woman appointed canon at St Davids Cathedral, a role she remained in until 2010.
She is currently the rector of the parish of Glan Ithon, near Llandrindod Wells, Powys.
The Church in Wales has elected its first woman bishop.