Williams came within two matches of tennis' first calendar-year Grand Slam since 1988, a bid that ended with a semifinal loss at the U.S. Open.
"She was the most deserving person for the award. She had an amazing year. The way she won her events; the fact that she's done this for so many years at such a high level," said Paul Fichtenbaum, editor of the Sports Illustrated Group. "She was a terrific candidate in a year of terrific candidates."
The cover photo of Williams — in high heels, sitting on a throne — was "her idea, intended ... to express her own ideal of femininity, strength, power," managing editor Christian Stone wrote on SI.com.
Monday's announcement marks a switch to the formal name of the SI award; past recipients were touted as Sportsman or Sportswoman of the Year.
"We just felt this was a natural evolution. ... We're not making a huge deal out of it," Fichtenbaum said. "It just feels like the right time to make the change."
Runner Mary Decker in 1983 was the last female athlete to earn the magazine's award by herself.
The U.S. women's national soccer team was picked by SI in 1999; speedskater Bonnie Blair in 1994 and gymnast Mary Lou Retton in 1984 were co-honorees with male Olympians. In 2011, Tennessee women's basketball coach Pat Summitt shared the award with Duke men's coach Mike Krzyzewski.
"Men's sports has dominated until recently, when women's sports has grown in popularity, and the competition is better than ever," Fichtenbaum said. "There's more of a focus on women's sports now. It's grown considerably. Specifically why? I'm not sure."
Other tennis players honored by SI were Arthur Ashe in 1992, Chris Evert in 1976, Billie Jean King in 1972.