Yvonne, the second Kenyan to win the prize in two years, took the $15,000 prize money with "Weight of Whispers".
The authoress said she felt "excited" and "stunned", and spoke of her personal obligation to encourage other people in Africa to write.
Her story is narrated by an aristocratic Rwandan refugee who leaves his country because of the massacres that killed 800,000 people.
Owuor has also written a screenplay for the Africa Script Development Fund and is currently an Executive Director of the Zanzibar International Film Festival.
The prize was announced by the chair of the judges, Zanzibari author Abd al-Razzaq Gurnah, at the UK's Oxford University.
Gurnah said her story’s “great strength is the subtle and suggestive way it dramatises the condition of the refugee and also successfully incorporates so many large issues.”
The story has already been published by a new Kenyan Internet magazine Kwani, set up by last year's Caine winner, Kenyan Binyavanga Wainaina.
The prestigious prize is awarded annually for writing by an African author that is published in English.
An "African writer" is taken to mean a writer born anywhere in Africa whose work reflects its cultural background.
Caine Prize history
The Caine Prize is named in memory of the late Sir Michael Caine, former chairman of the Booker Prize management committee for almost 25 years.
The winner was announced in July at a dinner in Oxford, to which all the shortlisted candidates were invited.
On the short list this year were two South Africans, a Congolese and a Zimbabwean.
The point of the prize is not, however, to pigeonhole authors as regional interest writers, but rather to put the spotlight on skilled writers who normally might not get much attention.
The story can be read at http://www.kwani.org/.