Carlsen sealed victory following three weeks of play and a series of tiebreakers in New York.
Karjakin tied against Carlsen in 12 regular rounds but was beaten in the final phase of four quickfire games.
Organisers said the event was followed by about six million chess fans around the world.
Hundreds of spectators paid between $100 and $500 to watch the games at a former fish market in Manhattan, separated from the two grandmasters by soundproof glass.
After his victory, Carlsen's supporters greeted him by cheering and singing "Happy Birthday", to mark his 26th birthday.
The boy who conquered the chess world
The prize of $1.1m (Â£879,000) is divided between the two players with the winner taking 60%.
Chess reached the height of its popularity in the 1970s, when the game was overshadowed by Cold War rivalry.
In 1972, the victory of American Bobby Fischer over Russian defender Boris Spassky at the World Chess Championship in Iceland was dubbed the "match of the century".
Commentators mentioned current geopolitical tensions in connection with this year's match when Kirsan Ilyumzhinov, the Russian president of the World Chess Federation, was accused by the US of collaborating with the Syrian government and barred from travelling to New York.
Magnus Carlsen of Norway has won the World Chess Championship for the third consecutive time after defeating challenger Sergey Karjakin of Russia.