Zhao won the directing Oscar for Nomadland, joining Kathryn Bigelow, who won in 2009 for The Hurt Locker.

"I'm extremely lucky to be able to do what I love for a living," she said backstage.

"This win means more people get to live their dreams. I'm extremely grateful."

This was the only year in 93 years of Oscar history with two female nominees: Zhao and Promising Young Woman director Emerald Fennell. Only seven women have ever been nominated.

Zhao's film - starring Frances McDormand - tells a story about a woman in her 60s and other transient workers in the American West.

The film won best picture and McDormand took home the award for best actress.

While wearing braids and sporting white tennis shoes, Zhao thanked her entire cast and crew. She called the process of creating the project a "once-in-a lifetime journey we've all been on together".

Zhao paid homage to those who inspired her to "keep going".

"This is for anyone who has the faith and the courage to hold onto the goodness in themselves and hold onto to the goodness in each other, no matter how difficult it is to do that," she said during her acceptance speech.

"This is for you. You inspire me to keep going."

The director talked about how a game she used to play with her father challenged her.

"I've been thinking a lot lately of how I keep going when things get hard," she said.

"I think it goes back to when I was a kid, when I was growing up in China, my dad and I used to play this game.

"We would memorise Chinese poems and texts. We would recite them together and try to finish each other's sentences."

It was the first Oscar for the 39-year-old, who was born in Beijing and went to college and film school in the United States. Nomadland was her third feature.

Zhao said she was also inspired by phrase that comes from a Chinese text "The Three Character Classic", which she said translated to "People at birth are inherently good."

She said that phrase had a major impact on her as a child, as she still stands firm on the words.

"I still truly believe them today, even though sometimes it may seem like the opposite is true," she said.

"But I have always found goodness in the people I met, everywhere I went in the world."

The other nominees were Lee Isaac Chung for Minari, Thomas Vinterberg for Another Round and David Fincher for Mank.

Zhao's history-making Oscars sweep is being met with a muted response in her country of birth.

State media in China remained silent as of Monday afternoon, with no mention of her win by either CCTV and Xinhua, the two main state-run outlets.

Australian Associated Press