Fernando Alonso led from pole position to chequered flag to win the German Grand Prix for Ferrari, while Germany's world champion Sebastian Vettel was stripped of second place for an overtaking infringement. Vettel dropped to fifth.
Race officials said that Vettel left the track as he passed McLaren's Jenson Button on the penultimate lap in a controversial move.
Vettel, who has yet to win his home grand prix -- and indeed any race in July -- went wide as he and the Briton went through a corner side by side. He was handed a 20 second penalty that demoted him to fifth. Red Bull team principal Christian Horner said before the decision was announced that a penalty for Vettel would be harsh
Button moved up to second place, ending a run of disappointing performances and Finland's 2007 Kimi Raikkonen took third for Lotus.
Alonso started on pole and held off challenges from Vettel and then Button as he stormed to victory in warm, sunny conditions, a stark contrast from the heavy rain which fell during practice and qualifying.
Alonso won the last time out at Hockenheim two years ago, but on Sunday briefly surrendered his lead after the first of his two pit stops. He soon regained it, however and the double champion dominated the race despite being under intense pressure throughout.
Japan's Kamui Kobayashi finished fourth for Sauber, after Vettel's demotion, with Mexican team mate Sergio Perez sixth.
Germany's seven times world champion Michael Schumacher was seventh, ahead of Webber and two more Germans - Force India's Nico Hulkenberg and Mercedes' Nico Rosberg.
Red Bull's Australian driver Mark Webber, winner of the previous race at Silverstone, started eighth after a five place demotion on the starting grid for an unauthorised gearbox change and finished in the same position.
Button's podium finish was a boost for McLaren, who moved ahead of Lotus into third place in the constructors' standings, but it was soured for the team by Lewis Hamilton suffering a puncture early in his 100th race and having to retire.
Quizzed on the podium by former driver Niki Lauda, Button thanked the crowd and did not get into the controversy of Vettel's overtaking manoeuvre.
"I had a great race out there," the McLaren driver says. "It is nice to be fighting at the front again, it has been a little while but I had a great race and I don't want wish to comment on the manoeuvre on turn six."
Vettel was angry with Hamilton for trying to overtake him while one lap behind and also described his move to overtake Button as a good piece of driving.
"It was a difficult one, I wasn't sure he was still on the inside or not," the defending champion says.
"Obviously the last thing you want to do is to make contact, so yes because it is easy in the dead angle, he is side by side really I cannot see him from the inside of the car so I tried to give enough room..."
"Obviously we were all struggling with our tyres chances in particularly. That's why I think I was able to get close and pass him," the German added.
Alonso's win was Ferrari's 219th, the 30th of the Spaniard's career and third of the season.
"We enjoyed the race," he says before being showered with champagne by Vettel and Button.
"Today starting on pole was the key factor because it was difficult to overtake so were maybe not the faster but we keep the position," Alonso added.
The Ferrari driver now has 154 points, to 120 for Webber. Vettel has 110 after 10 of the season's 20 races.
Reuters