The 20-year-old attacker succeeds the likes of Lionel Messi, Cesc Fabregas and Wayne Rooney in being named the best young player in Europe by the Italian newspaper
The 20-year-old was selected by a panel of 30 journalists working for the most influential publications from 20 nations around the Continent.
The Spanish midfielder became the 10th player to receive the award after seeing off the 39 other nominees who were initially selected.
"I'm overjoyed. It is a wonderful thing. I see the past winners and it almost makes me shiver, names of the highest prestige, like Messi," Isco told Tuttosport.
"This Golden Boy [award] will be an incentive for me to become a real star of international football, like those who have gone before me."
Isco accumulated 137 votes to win the prize, beating off competition from AC Milan's Stephan El Shaarawy - who came in second with 125 votes - and Atletico Madrid's shot-stopper Thibaut Courtois, on loan from Chelsea, who came third with 116 votes.
"When I read that I was one of three candidates for the title a I dribbled a little, I thought it was a joke," Isco explained. "When I knew that El Shaarawy and Courtois were the other candidates, I didn't expect to win."
Previous winners of the accolade include the likes of Lionel Messi, Cesc Fabregas, Sergio Aguero and Wayne Rooney, while the 2011 winner was Borussia Dortmund's Mario Gotze, who picked up the award at 19 years of age.
Isco has been in excellent form for his club so far this season, scoring six times and assisting on another eight occasions in his 25 appearances.
His performances in the Champions League in particular have drawn praise, particularly from the media in his native Spain.
But he insisted that he is only focusing on establishing his place in the national side, and played down comparisons to Andres Iniesta.
"So far I have been called up once for the Spain national team. I want to convince coach [Vicente] Del Bosque to call me up as soon as possible. Wearing the Roja jersey is a dream for all Spaniards.
"The Spanish press say that I am Iniesta's heir, but a comparison is wrong because Don Andres is one of the strongest midfielders in the world, our World Cup hero, the player who deserves to win this year's Ballon d'Or. However, my idol is Ronaldinho."
Isco, who will be presented with the award before kickoff in Saturday's clash with Real Madrid, also said he was happy to stay at Malaga for the foreseeable future, despite rumored interest from los Blancos and English Premier League champions Manchester City.
"I'm fine here," he explained. "I have a contract until 2016 and a buyout clause of 21 million euros. I am 20 years old and that does not mean that I should leave soon. It is a decision that has to be carefully considered with the club, with my agent Jose Segui and with my family."
Malaga currently lies in fourth place in the Liga table, just five points behind Jose Mourinho's men after amassing 28 points from 16 games.