Tenth when last seen in the Prix de l’Arc de Triomphe earlier this month, Magical (5-1) was happier back against her own sex and comfortably landed the spoils.
She was brought with a strong run early in the straight by Ryan Moore to head the John Gosden-trained favourite Lah Ti Dar over a furlong out.
The daughter of Galileo maintained the tempo to hold another Gosden runner, Coronet, by a length.
O'Brien said: "We're really delighted with Magical. We were always going to take our time on her. She had a lovely position and relaxed lovely, so we couldn't have been happier.
"We thought she was going to be a real contender for the Investec Oaks at one stage, but suffered an injury beforehand.
"We thought she would handle ease in the ground as she had form on a softer surface as a two-year-old so we are really delighted with her.
"She ran well in the Arc and she was only just coming back to full fitness in that race. Wayne Lordan rode her in that race and he said there was no doubt that she does stay a mile and a half as that was her first time over the trip.
"She's had an injury already this year and she would have to be 100% if she went to America (for the Breeders' Cup).
"We'll see how she comes out of this and the lads (owners John Magnier, Derrick Smith & Michael Tabor) like they always do will see how she is and then think about what race might suit her.
"The horses are running great. It's a great meeting, it's great to be here and it's great to have horses able to run here so we feel very privileged."
Paddy Power make Magical a 5-1 shot from 10-1 for the Breeders' Cup Filly & Mares Turf.
Moore said: "We always thought Magical was top-class. She didn't quite manage to win a Group One at two and then things have not gone to plan for her this year, but she ran a real good race in the Arc and Wayne (Lordan, who rode her at Longchamp) was very happy with her.
"We thought she would be a mile and a half filly and the Arc showed that she gets the trip. Today was very smooth the whole way and she had a lovely run round."
Gosden said of runner-up Coronet: "She was forced wide by the draw, she got a clear run and ran an absolute blinder - but full credit to the winner - while the other filly (Lah Ti Dar) ran a super race, but as you can see from looking at her, she's big and rather unfurnished and is a next-year filly when she's bigger and stronger.
"She will be put away until next year, while Coronet is going to Italy - assuming she comes out of this race in good order - for the Premio Lydia Tesio."
Peslier said: "She ran very well and showed good acceleration off that pace. For a few seconds I thought I might get to the winner, but she kept galloping."
St Leger runner-up Lah Ti Dar, the Evens favourite, threatened briefly to register the fourth success of her short career but was beaten a length and three-quarters into third.
Owner/breeder Lady Lloyd Webber was thrilled nevertheless and is already looking forward to seeing her race again as a four-year-old.
She said: "I thought she might win it at one stage, but we haven't seen half of her yet. Just wait until next year, as all of that family make better four-year-olds. Her mother Dar Re Mi was placed in a couple of Group Ones as a three-year-old, but she didn't win one, but at four she won the Pretty Polly Stakes and the Yorkshire Oaks, and then at five she won the Dubai Sheema Classic.
"Lah Ti Dar and her brother Too Darn Hot (the season's leading two-year-old and the unbeaten recent winner of the Dewhurst Stakes) will both winter with John (Gosden) as they are too valuable to come home to Watership Down. Too Darn Hot is a completely different type and too exciting to talk about, but the whole thing has been just fantastic."
Dettori was making no excuses but said: "I had a good trip from a bad draw and everything went smooth - I was just beaten by two better horse on the day. She's achieved a lot in a short space of time and we'll keep her in training as a four-year-old, when she'll be a force to reckon with.
"I think the best is yet to come. There's more improvement in her."