Wozniacki won her maiden Grand Slam in dramatic fashion as he triumphed in a three-set win over Romanian Simona Halep.
Williams was the defending Australian Open champion but skipped this year’s tournament as she continues to build her way back after giving birth to a baby girl.
Williams and Wozniacki have been close friends for a number of years and the American hailed the Danish star for her victory, which will make her world No 1 for the second time in her career.
Williams wrote on Twitter: “I got too nervous to watch but woke up to @CaroWozniacki new number one and aussie open champ. So awesome. So happy.
“Are those tears? Yup they are.
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“From a year ago to today I’m so proud my friend so proud. Literally can’t even sleep now.”
Wozniacki cried as she celebrated her win and when speaking at the trophy ceremony, she apologised to her opponent.
“I have to take a second to hug Daphne…..it’s a dream come true, and my voice is shaking, it’s a very emotional moment,” Wozniacki said.
“I want to congratulate Simona. I know today is a tough day and I’m sorry I had to win.
“It was an incredible match and an incredible fight, again I’m sorry.”