The left-arm spinner beat out Cuban leader Fidel Castro and third place winners Archbishop of Canterbury Rowan Williams and trade union leader Paul Mackney, the United News of India reported Thursday.
The award is given annually by the BLF to public figures who promote the wearing of beards by sporting impressive facial hair.
Keith Flett, organizer of the BLF, said Panesar, a devout Sikh, was chosen due to a combination of beard quality and his performance on the field.
"He may have a beard for slightly different reasons, but at the end of the day it's still a beard, and it's a magnificent beard," Flett said. "Obviously it's his bowling, but I think his beard may well play a role there. The Aussie batsmen are probably a bit bamboozled as they see the beard coming toward them and, you know, that's it -- off they go back to the pavilion."