Isis Shiffer made the EcoHelmet from recycled paper woven into a honeycomb structure to protect the cyclist's head from impact from any direction.
It is covered in a biodegradable coating that makes it rainproof for up to three hours.
Ms Shiffer, a graduate of the Pratt Institute of Design in New York, also gets £30,000 for winning the competition, which is open to university students or recent graduates.
She said: "I was lucky enough to be studying at Royal College of Art and the Imperial College of London for a semester, and was granted access to Imperial's crash lab.
"They had a European standard helmet crash set-up that allowed me to gather enough data on EcoHelmet's proprietary honeycomb configuration to know it was viable and worth developing."
She explained the plan was to sell the EcoHelmet at bike-share stations, such as those in London, for £4 per helmet.
James Dyson, the man who invented the bagless vacuum cleaner, said: "EcoHelmet solves an obvious problem in an incredibly elegant way.
"But its simplicity belies an impressive amount of research and development. I look forward to seeing EcoHelmets used in bike shares across the world."
According to the Department for Transport, there were more than 3,200 serious injuries to cyclists on the roads in 2015.
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