The Exit team's Ivan Milivojev and Konstantin Polzovic picked up the prize, the only one to be open to festivals outside of Britain, at Virtual's annual U.K. Festival Awards at London's Koko November 6.
Exit had faced some fierce competition from the likes of Denmark's Roskilde, Belgium's Rock Werchter and Pukkelpop, Holland's Lowlands and Pinkpop, Hultsfred (Sweden), Quart (Norway), Benicassim (Spain) and France's Les Eurockeennes de Belfort.
"We came over because we were so pleased to be among those nominated, but we hadn't really thought that we might win," Milivojev told Pollstar before beginning the journey of taking the award back to Serbia.
"We are really surprised and very grateful for all the votes and support from the U.K. people. This is a big step for us and it is amazing that Exit is so popular outside the Balkan region.
"It's become a real social force that is a symbol of togetherness and cultural diversity and enables us to promote social campaigns that are important for Serbian and Balkan youth such as fighting the Schengen visa regime.
"We aim to bring people together from the ex-Yugoslavia region and beyond in order to promote the interaction of different cultures, traditions and beliefs through music and social activities," Milivojev said.
The festival is the biggest music and cultural event in old Yugoslavia, set within the walls of the 17th Century Petrovaradin Fortress and offering stunning views over the River Danube and city of Novi Sad.
Where the site overlooks the river there's a stark reminder of the country's more recent history in the battered shape of the ruins of the Varadin, Sloboda and Zezelj bridges, which NATO bombed to destruction during the course of an afternoon in the spring of 1999.
The Fortress site houses 24 performance arenas within the 16-square mile castle complex, connected by cobbled streets, ramparts and tunnels.
From its humble beginnings as a student-initiated project against the former Serbian leader Slobodan Milosevic, it's gained recognition in the U.K. and throughout the rest of Europe.
More than 10,000 of the 50,000 daily visitors to the 2007 festival came from Britain.
"We were thrilled that all of the nominated events made the trip over to attend our awards and delighted that Exit was voted best European festival," said Steve Jenner, director of Virtual Festivals. "It's a spectacular event and a favourite with many of the artists we speak to, as well as fans."