Olympians in other sports have earned the award before in its 54-year history, but never a swimmer.
Phelps broke Mark Spitz's record with eight gold medals at the Beijing Olympics in August and became the winningest Olympian ever with his 14 career victories.
Phelps, 23, from Baltimore, follows a more traditional winner, NFL quarterback Brett Favre. Sports Illustrated Group editor Terry McDonell called the selection of Phelps the easiest choice he has made.
McDonell said it is obvious that Phelps changed "not only swimming, but the entire Olympic landscape."
How did he do it? What did it mean for the country? Sports Illustrated's Alan Shipnuck described it best:
"What happened is that for eight days in August, Debbie Phelps's son turned the Beijing Olympics into a serialized thriller with nightly installments that played out in prime time. Eight gold medals and seven world records would have been more than enough to secure his stardom, but Phelps's performance was made all the more unforgettable by two images for the ages: his primal scream punctuating an improbable U.S. comeback in the 4x100-meter freestyle relay on the second night of coverage, and the heart-stopping, fingertip-bending photo finish in the 100 butterfly for his penultimate gold. In the midst of a contentious presidential election and the first signs of a faltering economy, Phelps brought Americans together by the tens of millions, the TV serving as a portal to a faraway land and the outer limits of athletic achievement."