The Gold Medal for Fine Art and £5,000 will be presented to Seán Vicary in a ceremony on the Eisteddfod Field in Tregaron on the opening day of the Festival.
According to the selectors, Julia Griffiths Jones, Peter Wakelin and Catrin Webster, Seán Vicary's work was "exciting and original".
His video, Sitelines, responds to Alan Garner's novel The Owl Service, which in turn responds to the legend of Blodeuwedd, creating a new narrative around her in the Llanymawddwy valley in the 1960s.
Seán spent two years in fieldwork around the Llanymawddwy valley researching, collecting and animating resonance objects. Among these were 18th century nails, a witch's bottle, horsehair and lime plaster.
He said the haptic process of stop-motion animation was like a “ritual invocation of sympathetic magic” creating a 'receiver' for tuning into spectral wavelengths and decoding residual transmissions; providing eerie optics at the same time as non-linear time.
The selectors said: "The Gold Medal for Fine Art went to Seán Vicary for his video animations, which are excitingly original and highly evocative.
"Although he originally studied painting, he was fascinated by the possibilities of new media in the form of digital photography and animation.
"Seán's film conveys the links of a rich past in the valleys of the Welsh highlands. He records found objects - a piece of horsehair plaster, handmade nails, a 'witch bottle' - and weaves them into a surreal dance, imaginative to deep time music.
"We were thrilled by his combination of nature, technology, poetry and ambiguity. His work can be seen as a continuation of a neo-romantic tradition dating from the 1930s which is linked to the Welsh landscape - although it has 'to be completely rooted in the present and the future when looking at new media opportunities.'
Seán Vicary moved to Wales almost 30 years ago, and now lives in Cardigan. He works across moving images, animation and digital media. His work has been broadcast in Britain and exhibited internationally.
He said 'Sitelines' is a response to Alan Garner's cult novel The Owl Service, which is a re-imagining of the Blodeuwedd legend of the Mabinogion from the 1960s set in the Dyfi valley.
He explained that the film explores the novel's idea of the valley as a 'reservoir' charged for unseen forces but also as a trigger for Garner's creative process and his personal creative process.
"The process was originally started as part of a collaborative deep mapping project with professors of literature and geography from Cardiff and Swansea universities, and over time the process became increasingly reflexive with a strange folding of myself in the film.
"I grew up with Garner's early novels. Looking back, I see how they suggested a framework for mapping the boundaries of my own childhood: defined by ditch, field and hedgerows. But The Owl Service was something else. Too young to the book, my presentation was the 1969 television adaptation. I'm not sure I ever recovered," he said.