The up-and-coming funnyman was given the prize by digital TV channel Dave, whose panel put a selection of their favourites to a public vote.
He won for the joke: "I needed a password eight characters long so I picked Snow White and the Seven Dwarves."
Last year's winner, quick-fire joker Tim Vine, was beaten into second place by Helm.
Helm said: "I knew my joke was the funniest joke of all the other jokes in 2011.
"Thank you to Dave and all the people that voted for proving me right."
Veteran entertainer Paul Daniels won the wooden spoon for the worst joke of the festival.
He won the dubious honour for his gag: "I said to a fella 'Is there a B&Q in Henley?' He said 'No, there's an H, an E, an N an L and a Y'."
The top 10 festival funnies were judged to be:
1) Nick Helm: "I needed a password eight characters long so I picked Snow White and the Seven Dwarves."
2) Tim Vine: "Crime in multi-storey car parks. That is wrong on so many different levels."
3) Hannibal Buress: "People say 'I'm taking it one day at a time'. You know what? So is everybody. That's how time works."
4) Tim Key: "Drive-Thru McDonalds was more expensive than I thought... once you've hired the car..."
5) Matt Kirshen: "I was playing chess with my friend and he said, 'Let's make this interesting'. So we stopped playing chess."
6) Sarah Millican: "My mother told me, you don't have to put anything in your mouth you don't want to. Then she made me eat broccoli, which felt like double standards."
7) Alan Sharp: "I was in a band which we called The Prevention, because we hoped people would say we were better than The Cure."
8) Mark Watson: "Someone asked me recently - what would I rather give up, food or sex. Neither! I'm not falling for that one again, wife."
9) Andrew Lawrence: "I admire these phone hackers. I think they have a lot of patience. I can't even be bothered to check my OWN voicemails."
10) DeAnne Smith: "My friend died doing what he loved ... Heroin."
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