The digital media company said the smartphone proved more popular than reality television celebrity Kim Kardashian, pop star Katy Perry and singer and actress Jennifer Lopez, who placed in the top five.
American Casey Anthony, the woman acquitted of the murder of her young daughter after a highly publicized trial, was No. 2.
"This is the first time since 2002 that we have had a gadget at No.1, which is an iPhone." Vera Chan, a Web trend analyst at Yahoo!, said in a conference call announcing the results of the review now in its 10th year.
"Even though the product has been around for four years it just became such a major news story," she added.
PlayStation2 topped the list in 2002.
Chan credited the iPhone with helping to facilitate political movements around the world and said the device embodied the vision of Apple co-founder Steve Jobs who died in October.
Women dominated the list, capturing six out of the top 10 spots. Troubled actress Lindsay Lohan made headlines for a brief stay in jail and court appearances for violating probation on drunken driving and theft charges captured the No. 6 spot.
Actress Jennifer Aniston, a first timer on the top 10 list along with Lopez, came in eighth.
In addition to the Casey Anthony trial, the Japan earthquake and Osama bin Laden who was killed in a U.S. assault in Pakistan earlier this year, were the only news stories to make the top 10.
"People don't have to search for details they get in the news, and it is rare that a news story end up on the overall list," said Chan.
Pop princess Britney Spears, who dominated the list in the top spot for four consecutive years, failed to make the list this year.
"American Idol," which was the most search item in 2004, placed seventh.
The Yahoo! list is based on aggregated visitor activity on the network and billions of consumer searches. (Reuters)
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