The five-time champion, Caltech, dropped to second place, swapping places with the elite UK university, while the rest of the top 10 positions remained unchanged from last year.
Top 100 world universities 2016/17 – THE rankings
Overall, the UK takes 91 of the top 980 places in the 13th annual Times Higher Education rankings; 88 of these make the top 800 compared with 78 last year.
It is second only to the US for the number of world-class universities featured in the top 800. Within the top 200, the UK has 32 representatives – two less than last year.
Phil Baty, editor of the rankings, said: "It is fantastic news that the University of Oxford has topped the World University Rankings for the first time. It is a great result for the UK higher education sector and cements its position as one of the greatest university nations in the world.
"However, the UK will have to watch out for Asia’s continuing ascent. Although the notion of Asia as the ‘next higher education superpower’ has become something of a cliché in recent years, the continent’s rise in the rankings is real and growing.
Primary school forced to back down on controversial rule ordering children to walk with hands behind back
An ‘outstanding’ primary school has been forced to back down on a rule ordering children to walk with their hands clasped behind their backs 'at all times' after a revolt from parents, it has emerged.
Last year pupils at St George the Martyr Primary School in Camden, north London, were told they must walk in the 'correct way' in school corridors, which school bosses called the 'University Walk'.
The term is believed to derive from how students at elite universities - such as Oxford, Cambridge and St Andrews - were told to walk in bygone years.
'Maximise learning time' and 'raise their aspirations'
Angela Abrahams brought in the rule last year when she was head teacher, much to the fury of parents, in a bid to "strengthen pupil safety, maximise learning time" and "raise their aspirations".
Parents, however, were horrified, with some saying their kids looked like "something out of a chain gang".
Mrs Abrahams, however, left her job before the summer holidays and has been replaced by new head teacher Adam Young, who has 'quietly' dropped the order.
Mr Young is believed to have been alerted to the 'unpopularity' of the rule by staff and parents.
One parent - who asked not to be named - said: "It was like the children were living ion the 18th century. What so-called educators forget is that this is a primary school where children are just beginning to learn.
"There is so much going on in their heads that they do not need to constantly be reprimanded for walking in a perfectly natural way with their arms down by their sides.
"Children do not naturally walk with their hands behind their backs - they are not Lord Snooty, they are little kids trying their best to learn.
"It's a blessed relief that all the nonsense has now been scrapped now that a new head teacher has taken over. "Now kids can get back to being kids."
'Akin to prisoners being moved jails'
Another parent said the walk was "akin to prisoners being moved jails", adding: "School is for learning and developing your mind, not walking single file like prisoners on a chain gang."
Speaking last November, former head Angela Abrahams said: "Our recently introduced 'University Walk' inspires children to be the best they can be and to 'go shine in the world'.
"It was introduced to strengthen pupil safety, further raise the aspirations of pupils and to maximise learning time.
"Staff report that they appreciate the impact it has had on learning time and pupils continue to be very happy and excited about learning."
The new headmaster of the school, which is rated outstanding by Ofsted, has so far not commented on the scrapping of the rule.