According to market research firm IDC, 1.004 billion smartphones were shipped last year, marking a 38.4% increase from the previous year.
South Korea's Samsung accounted for the bulk of that figure, followed by Apple and China's Huawei.
Smartphones made up more than half of the 1.8 billion mobile phones sold.
IDC said this was the first time more than one billion smartphone units were shipped in a single year.
"Among the top trends driving smartphone growth are large screen devices and low cost," said Ryan Reith, program director with IDC's Worldwide Quarterly Mobile Phone Tracker.
"Of the two, I have to say that low cost is the key difference-maker."
"Cheap devices are not the attractive segment that normally grabs headlines, but IDC data shows this is the portion of the market that is driving volume," he said.
"Markets like China and India are quickly moving toward a point where sub-$150 smartphones are the majority of shipments, bringing a solid computing experience to the hands of many."
South Korea's Samsung extended its market dominance with 42.9% growth, the IDC survey said.
Apple, however, saw its market share decline, posting slower growth than the overall market with 12.9% growth.
A separate survey released by Strategy Analytics posted slightly differing figures.
It said there were 990 million smartphones shipped last year, from an overall figure of 1.7 billion mobile phones.
More than one billion smartphones were shipped last year, with Samsung extending its lead as the world's biggest vendor, a new survey has showed.