Even though the election had been expected to be a close contest between the two, Sanwo-Olu, the candidate of the All Progressives Congress (APC), won with a margin of 533,304 votes.
According to the results announced by the Independent National Electoral Commission (INEC), Sanwo-Olu, a former commissioner, won 739,445 votes while Agbaje finished the race with 206,141 votes.
During his acceptance speech shortly after the announcement of his victory, Sanwo-Olu revealed that his opponent had called him to concede defeat and admit that the process was free and fair.
He then took to his Twitter account (@jidesanwoolu) to thank the pharmacist for the gesture.
"At exactly 19:07, I received a call. Thank you @jimiagbaje for your congratulatory call filled with kind words.
"It was an intense campaign and I am happy we can now focus on the very important job at hand; delivering a Lagos that works for all," he posted.
In his acceptance speech, the governor-elect lamented about the divisive rhetoric and strategies that were employed during the campaign period and urged everyone to work together now that the election is over.
He said his administration will continue to push an already great Lagos to greater heights with the help of all relevant stakeholders.
"Today, we did not just vote Babajide Sanwo-Olu, we voted that we should make a greater Lagos," he said.
Sanwo-Olu coasted to victory in all of the state's 20 local government areas in Lagos Island, Lagos Mainland, Epe, Ikeja, Ikorodu, Amuwo-Odofin, Ibeju-Lekki, Agege, Apapa, Somolu, Eti-Osa, Oshodi-Isolo, Mushin, Kosofe, Surulere, Badagry, Ojo, Alimosho, Ifako-Ijaye and Ajeromi-Ifelodun.
The former commissioner will now replace incumbent governor, Akinwunmi Ambode, when he's sworn in on May 29.