"I, Daniel Blake", the veteran left-wing filmmaker's damning indictment of the poverty and humiliation inflicted on the most vulnerable by welfare cuts in Britain, had many critics in tears.
"The world we live in is at a dangerous point just now," said Loach as he picked up the award. "We are in the grip of a project of austerity driven by ideas that we call neo-liberalism that brought us to near catastrophe.
"It has led to billions of people in serious hardship and many millions struggling from Greece in the east to Spain in the west... while this has brought a tiny few immense wealth."
Loach, who turns 80 next month, came out of retirement to make the film on carpenter Daniel Blake's complex journey to get benefits in Britain after suffering a heart attack and being told by doctors he can no longer work.
Blake befriends a young single mother of two who is sanctioned for being late at a benefits centre, leaving her with no money for food.
Actress Hayley Squires was praised by the Cannes jury for one of the most hard-hitting performances of the festival as the mother who, weakened by hunger, cannot stop herself from ripping open a tin of baked beans in a food bank and scooping it into her mouth.
"We remember the people who inspired this... those people who without (food banks) would otherwise be hungry in the fifth richest country on the planet," Loach said.
While carrying out research for the movie, the filmmakers interviewed people working for welfare centres, who said they were given a quota of how many sanctions to hand out.
One of the actresses in the film was a former employee of Britain's Department for Work and Pensions who "couldn't stand it anymore", Squires told a press conference this week.
One of the main themes tackled in the film is how the poor are viewed by others.
Because the main character Blake is denied illness benefits he is forced to apply for unemployment assistance.
That in turn forces him to spend hours hunting for jobs which he has to turn down because he is too sick to work, and is accused of being a scrounger.
"The most vulnerable people are told their poverty is their own fault," Loach told reporters this week. "If you have no work it is your fault that you haven't got a job.
The world of work -- or the lack of it -- has long been a favourite theme of the director, who grew up the son of an electrician and a dressmaker.
"Cinema can represent the interests of the people against those who are more powerful and mighty," he said as he accepted his award.