Virginia has held that spot for the past four years, but Utah slid into the top spot because of Virginia's rising labor and energy costs.
"I'm here to tell you today that Utah is now the BCS buster of economic development in America," Governor's Office of Economic Development Executive Director Spencer Eccles told reporters Thursday.
3. North Carolina
The Forbes "Best States for Business and Careers" report measures six categories for businesses: costs, labor supply, regulatory environment, current economic climate, growth prospects and quality of life.
According to the article, Utah's economy has expanded 3.5 percent annually over the past five years. That's faster than any other state in the country except North Dakota.
"We have to work to create an environment twofold," said Eccles. "Number one, to attract businesses, and number two, to enable businesses to be successful."
Gov. Gary Herbert praised the business community, workers and innovators for the ranking. "It's remarkable that Utah has emerged as the number one place for business and careers," he said.
"It proves that our economic development plans are working. Jobs are growing again in Utah. We are leading this nation out of the economic recession."
The governor joined business leaders in crediting the ranking to a strong focus on economic development over the past five years. Gov. Herbert says the plans were put together when he and former Gov. Jon Huntsman Jr. first took the reins of leadership.
"We have 20,000 Utahns now that have jobs that they did not have a year ago," he said. "We are starting to grow. We are leading the nation out of this economic recession."
As employment in the U.S. has declined over the past five years, the article states that in Utah employment has actually increased 1.5 percent, which is fourth-best in the nation.
It also states that household incomes in Utah have surged 5 percent annually, which leads the country and is twice as much as the national average.
"We've created an environment in the state through deregulation, in many regards, and low taxes to make a very business-friendly state," Eccles said. "It's the people and it's the businesses that have made this really happen."
The state has also kept energy costs 35 percent below the national average, produced an educated labor force with 90 percent of residents holding a high school diploma, and boasted an AAA debt rating from Moody's, S&P and Fitch.
The report also credits Utah for a low corporate tax rate.
Scott Schaefer, associate dean for academic affairs at the University of Utah David Eccles School of Business, says people struggling to find good jobs should find better prospects here than in most other parts of the country.
"This is the kind of ranking that attracts attention," he said. "It's going to help attract really good employers to come locate in our state."
While education funding will continue to challenge the state financially, Schaefer says the Legislature has done a good job of keeping state finances under control.
"We're a bit at the mercy of what happens in the rest of the U.S. economy, but as soon as the rest of the U.S. economy turns around, I think the state of Utah will be right there leading in terms of economic growth and job growth," he said.
Schaefer says the economic future in Utah is brighter than in the rest of the country.
Earlier this year, Forbes crowned Utah the country's most fiscally fit state government.
Gov. Herbert is quoted in the article saying that Utah has "a fiscally conservative government where we are trying to keep government off your backs and out of your wallet."
Forbes and the governor also credit a highly-educated workforce for good prospects in economic expansion. "Clearly, one of our strengths is having a labor force that is young, energetic, productive, high-tech savvy," Herbert said.
He went on to say, "It proves that our economic development plans are working. Jobs are growing again in Utah. We are leading this nation out of the economic recession."
Lane Beattie, president and CEO of the Salt Lake Chamber, said, "This ranking doesn't just show that we've weathered the storm better than the rest of the nation. It shows that we have been good for a long time and that is very attractive to businesses looking at our state and for businesses that are already here."
"We are on the right road going the right direction," Herbert said emphatically. "It's hard to be better than number one."