The Cold War fantasy film "The Shape of Water" is the victor of the best picture Academy Award.
McDormand, a victor throughout the awards season for her scintillating turn as a grieving, rage-filled mother in "Three Billboards", took home her second Oscar, 21 years after winning for "Fargo".
"Look around ladies and gentlemen", she urged the glittering crowd in the Dolby Theater. "Invite us into your offices and we'll tell you all about them", she said.
Gary Oldman, 59, won the Best Actor for "Darkest Hour".
Jimmy Kimmel, who returned to host the ceremony for the second year in a row, kicked off the night with a monologue that bounced between topics from last year's best picture snafu to Harvey Weinstein's scandal and Hollywood's movements to end sexual harassment and gender inequality within their industry.
Kimmel quipped that the tall golden Oscar statue itself was "the most beloved and respected man in Hollywood".
She said: "Meryl (Streep), if you do it, everyone else will". He is literally a statue of limitations. "We need to set an example", he said.
Israel's Netanyahu departs for United States trip amid corruption investigation
The Palestinians , meanwhile, said Trump's decision on Jerusalem renders the United States an unreliable actor in peace talks. Netanyahu has denied wrongdoing in all the graft probes, often saying, "There will be nothing because there is nothing".
The Best Picture was presented by Warren Beatty and Faye Dunaway, who had mistakenly named La La Land the Best Picture victor on stage after they were accidentally handed the envelope for Emma Stone's Best Actress award, rather than Moonlight's winning card.
In a surprise turn of events, Beatty and Dunaway were tapped to present the same prize this time around, and the presentation went without a hitch.
Elsewhere, awards were spread around, recognizing first-timers, LGBT issues and films inspired by other cultures.
In an night of honors being shared fairly evenly among several candidates, Martin McDonagh's dark crime comedy "Three Billboards Outside Ebbing, Missouri" had to settle for best actress for Frances McDormand and best supporting actor for Sam Rockwell.
The biggest surprise of the night was Jordan Peele's win for best original screenplay for his racial thriller Get Out.
Kenyan-Mexican actress Lupita Nyong'o and Pakistani-American Nanjiani also spoke out on behalf of America's so-called Dreamers - hundreds of thousands of young people whose parents brought them to the United States illegally, and whose fate is now uncertain.