The victory gave Kiryat Shmona 67 points from 32 matches and opened a 16-point gap over Maccabi Haifa and Hapoel Tel Aviv, both on 51 points with only 15 points left to play for.
Consistency has been the key for Kiryat Shmona, who have lost only three matches and conceded 16 goals in 32 outings while Hapoel and Maccabi Haifa, traditionally the dominant Israel teams in the last three decades, repeatedly failed to find form.
Prime Minister Benjamin Netanyahu called to congratulate the team and told coach Ran Ben Shimon and club owner Izzy Sheratzky: "You have proven today that you are capable of doing anything you want, this is a celebration for all the people of Israel."
Kiryat Shmona were founded by local industrialist Sheratzky in 2000 when he merged two smaller clubs. They were promoted to the top flight in 2007 and first won silverware, the secondary Toto Cup, last season and retained it in January.
"I don't ever remember a team winning the championship with a 16-point lead, it is unbelievable," Sheratzky told the jubilant home crowd after the players lifted him on their shoulders as they celebrated on the pitch.
"There are some fantastic people here, not only as players and I am convinced that this is not a one-off victory."
Monday's victory was a bitter-sweet moment for Ben Shimon, who already knew he would not be staying on next season after failing to agree a contract extension. Sheratzky has named Gil Landau as coach for next term.
Kiryat Shmona, the country's northern-most urban centre with a population of 23,000, is the smallest town with a team in the Premier League and will be one of the smallest to compete in the Champions League preliminary rounds next season.
It is situated close to Israel's border with Lebanon and for decades was the target of rockets and cross-border raids mainly by Palestinian militants based in Lebanon.
Many of the town's residents briefly fled during Israel's 2006 offensive in Lebanon against Hezbollah guerrillas, who launched thousands of rockets on northern Israel, but the area has largely remained calm since the war.
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