Price beat out 2011 winner Justin Verlander by only four points in balloting by the Baseball Writers' Association of America. Other than a 1969 tie between Mike Cuellar and Denny McLain, it was the tightest race in the history of the AL award.
Runner-up two years ago, Price was the pick this time by the slimmest of margins. He received 14 of 28 first-place votes and finished with 153 points to 149 for Verlander, chosen first on 13 ballots.
Rays closer Fernando Rodney got the other first-place vote and came in fifth.
"It means a lot," Price said. "It's something that I'll always have. It's something that they can't take away from me."
Price went 20-5 to tie Jered Weaver for the American League lead in victories and winning percentage. The 27-year-old lefty had the lowest ERA at 2.56 and finished sixth in strikeouts with 205.
Verlander, also the league MVP a year ago, followed that up by going 17-8 with a 2.64 ERA and pitching the Detroit Tigers to the World Series. He led the majors in strikeouts (239), innings (238 1-3) and complete games (six).
Price tossed 211 innings in 31 starts, while Verlander made 33. One factor that might have swung some votes, however: Price faced stiffer competition in the rugged AL East than Verlander did in the AL Central.
"I guess it's a blessing and a curse at the same time," Price said. "There's not an easy out in the lineups every game. It feels like a postseason game."
Weaver came in third with 70 points, but was listed second on a pair of ballots. The right-hander threw a no-hitter and had a 2.81 ERA in his first 20-win season but missed time with injuries and totaled only 188 2-3 innings for the Los Angeles Angels.
The top pick in the 2007 amateur draft out of Vanderbilt, Price reached the majors the following year and has made three straight All-Star teams.
Despite going 19-6 with a 2.72 ERA in 2010, he finished a distant second in Cy Young voting to Felix Hernandez, who won only 13 games for last-place Seattle but dominated most other statistical categories that year.
Verlander was trying to become the first AL pitcher to win back-to-back Cy Youngs since Boston's Pedro Martinez in 1999 and 2000. San Francisco right-hander Tim Lincecum did it in the National League in 2008-09.
Information from The Associated Press was used in this report.