This marks a historic milestone on the Internet.
The view counter for Gangnam Style, which was only posted on the video-sharing site July 15, clicked over into 10 figures at around 17:50pm on Friday, amid an ongoing global craze for the singer and his horse-riding dance.
As of 05:15am on Saturday the counter showed 1 008 286 535 views.
"Finally becoming #BillionStyle!!!" Psy wrote on Twitter.
Among the first to congratulate him was American rapper MC Hammer, of 1990s "U Can't Touch This" fame, who posted: "Congratulations !!! You made history !!! 1 Billion Views !!!!"
Kevin Allocca, YouTube trends manager, attributed Psy's success "to the universal appeal of catchy music — and er, great equine dance moves".
Psy has swept all before him in the past five months, hoovering up awards and scoring guest appearances with everyone from Madonna to the head of the United Nations.
The video and its singer have been given walk-on roles at major world events like the US presidential election.
And the timing of the one-billion views breakthrough dovetailed with a viral social network hoax that had the 16th century French seer Nostradamus apparently referencing Psy as a harbinger of the December 21 apocalypse.
Billboard.com said Gangnam was estimated to have generated $2,000,000 from YouTube alone at a reported rate of two dollars for every 1,000 views, with digital downloads and on-demand services bringing earnings from the song to $6.01 million in just five months.
It also earned Psy a contract with Justin Bieber's management agency and a number of assessments and projections have been posted claiming the song has generated over $8.1 million in advertising deals.
The one billion milestone comes less than a month after the video took the all-time most-viewed title away from Canadian heartthrob Bieber, with his song "Baby" still in second place Saturday with more than 813 million views.
Rolling Stone put Gangnam Style at number 25 on its top 50 list of best songs for 2012 and labelled Psy as "Seoul Brother Number One".
Psy plans to wrap up the year with an appearance on "New Year's Rockin' Eve" on ABC in New York, his agency said.
Although its imminent demise has been predicted many times, the Gangnam phenomenon has refused to die.
Every time it has looked like fading, another parody, another celebrity or even another world leader has popped up to administer some publicity CPR.
The song – which refers to a trendy Seoul district – has spawned a mini tribute video industry and has been co-opted by an impressive roster of big names, including Chinese dissident artist Ai Weiwei.
The public has joined in, with tens of thousands turning out for giant flashmob performances in cities like Paris and Rome, and there have been copy-cat videos from soldiers in Afghanistan and prisoners in the Philippines.
The quirky star, whose real name is Park Jae-Sang, has won adulation in his homeland for the global hit and was this month awarded one of South Korea's highest cultural honours, the Okgwan Order of Cultural Merit.
Psy hit a speedbump in the United States last month when anti-American views he voiced a decade ago caught up with him – but he apologised and went on to perform at a "Christmas in Washington" gala attended by Obama and his family.
South Korea sees popular culture as a potent export force, providing international exposure for a country that still feels overlooked in comparison to neighbours China and Japan.
The government has spent substantial time and money supporting the so-called Hallyu (Korean Wave) of TV shows and pop music that has swept across Asia in the past decade. – Sapa-AFP