FIFA President Gianni Infantino presented Modric with the award.
The players had their say, and so did the fans, who voted for the Puskás and FIFA Fan Awards, with Mo Salah the ultimate victor of the Puskás Award thanks to his outstanding goal against Everton.
Salah topped the vote on the official Federation Internationale de Football Association website from a list of 10 candidates, with fans opting for the Liverpool striker's moment of individual brilliance in the Merseyside derby.
"I'm still not realising how good a year I had collectively, individually, and I'm very proud for everything I achieved this year and it will be remembered forever". Ronaldo also scored a memorable hat-trick in the FIFA World Cup but did not progress beyond the round of 16.
Modric becomes the first Croatian player to win the award after an outstanding year for club and country.
However, Portugal's last 16 exit to Uruguay in Russian Federation and Ronaldo's failure to score in the semi-finals or final of the Champions League has opened the door for Modric.
Despite scoring in each of his two appearances in Russia, The Pharaohs bowed out at the group stage with three defeats.
Salah received the Puskas award for the best goal, for his effort against Everton in the Premier League at Anfield last December.
After Gianluigi Buffon picked up the inaugural The Best FIFA Goalkeeper Award at last year's ceremony, Thibaut Courtois was crowned his replacement after the now Real Madrid man's outstanding year with Chelsea and stunning performances at Russian Federation 2018.
Modric believes he had the standout year of his career, winning the Champions League with Madrid and captaining Croatia to the final of the World Cup.
Marta won her first women's Federation Internationale de Football Association player of the year award since 2010 after leading Brazil to Copa America Femenina glory.
France boss Didier Deschamps took home the prize for best manager after leading Les Bleus to their second World Cup title with a 4-2 triumph over Croatia in the July final.
The female nominees for FIFA's The Best are Ada Hegerberg (Norway), Dzsenifer Marozsan (Germany) and Marta (Brazil).