Villareal and Lifschutz Davidson Sandilands' Current proposal was selected from a six-strong shortlist to win the Illuminated River competition, which will see London's river crossings lit up at night by colourful lighting.
Other shortlisted teams were headed up by London studios AL_A, Adjaye Associates, Sam Jacob Studio, New York firm Diller Scofidio + Renfro, New York-based artist Leo Villareal and Lyon lighting studio Les Éclairagistes Associés.
"The whole team shares a belief in the power of large-scale public culture and art to enrich our cities," said Villareal.
"In order to nuance the concept design, and create presence and legibility, we intend to take time to study the river in all its manifestations."
"Our aim is for a lighting masterplan which reduces pollution and wasted energy, is sensitive to history and ecology and subtly rebalances the ambient lighting on the river to provide a beautiful night-time experience for residents and visitors."
The Greater London Authority has also provided a grant of £100,000, while the Rothschild Foundation has contributed a further £250,000 and the City of London Corporation has given £500,000.
The winner was selected by a jury including artists Michael Craig-Martin and James Turrell, as well as former Serpentine Gallery director Julia Peyton-Jones and Second Home founder Rohan Silva.
"Leo Villareal's proven ability to paint with light matched with Lifschutz Davidson Sandilands' direct experience of building bridges over the Thames was an irresistible and inspirational combination," said foundation chair Hannah Rothschild.
"Their scheme is beautiful, ambitious and realisable but always considerate to the environment, lighting levels and energy conservation," she added.
"The jury is convinced that the winning team will transform the centre of London while remaining true to the spirit and integrity of the Thames and its communities."
Villareal originally trained as a sculptor, but has been creating works with light and computer code for the last 10 years. The artist's previous light installations include The Bay Lights, which illuminates San Francisco Bay Bridge.
Lifschutz Davidson Sandilands is currently working with Stanton Williams on a new University College London campus at London's former Olympic Park.
Team: Leo Villareal, Lifschutz Davidson Sandilands and FuturePace, Atelier Ten, Beckett Rankine, Bradley Hemmings, Core Five, Futurecity, Greenwich+Docklands International Festival, MBNA Thames Clippers, Montagu Evans, Pentagram, Price & Myers.