Therese Van Belle, 58, beat nine other finalists in the contest who will now all go back on the streets.
Organiser Aline Duportail said the competition was meant to draw attention to the plight of the homeless.
But woman's rights activist Jacqueline Aubenas said: "I am outraged. These girls that turned into puppets parodying their own life is an absolute pathetic."
The contest was judged over two months with elimination rounds that culminated in a final that included catwalk skills and fashion judgement.
Aline Duportail said: "The event was about the contestants' inner strength and determination to get themselves out of their old life and on a new path."
Runner up Leonie Renier, 39, said she had lost her house and custody of her children because of drug and alcohol abuse.
She said: "The contest is not obscene - for a homeless person to want to be beautiful is not obscene. It is the misery of life on the streets that is obscene."
The contest was sponsored by local firms including a florist and a restaurant that were on the judging panel of the contest organised by social worker Mathilde Pelsers, 54, and her beauty queen daughter Aline Duportail, aged 18.
Winner Therese who was selected for her "fighting spirit and her will to improve her situation" said: "I'm really overcome, I've never been lucky in my life. This is the first time I've been lucky. I think my life is about to change for the better."
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