The classic 1967 LP is one of four by John, Paul, George and Ringo that make the top 10 in the US magazine's list of 500 greatest rock records, as chosen by 273 musicians, critics, fans and historians.
The Fab Four have three other albums in the top 10 Revolver at number three, Rubber Soul at number five and the White Album at number 10.
"Sgt Pepper is an unsurpassed adventure in concept, sound, songwriting and studio technology. No other pop record of that era, or since, has had such an immediate or titanic effect," said writer Anthony DeCurtis, who helped compile the chart.
The Beach Boys were at number two with Pet Sounds. The Rolling Stones had one album on the top 10 Exile on Main Street, at number seven.
Predictably, the list is weighted toward testosterone-fueled vintage rock. The top solo female is Joni Mitchell, whose 1971 Blue is number 30.
Elvis Presley is at number 11 with his collection of early rockabilly tunes, The Sun Sessions.
Bob Dylan has two albums in the list Highway 61 Revisited at four and Blonde on Blonde at nine.
Though typically the odds-on favourite for such rankings, Sgt Pepper wasn't a slam-dunk.
"There was a horse race," says Rolling Stone music editor Joe Levy. "Early on, any number of albums in the top 10 were in the lead. The final result is no shock, but there's a reason for that. The Beatles, after all, were the most important and innovative rock group in the world. And Sgt Pepper arguably set the tone for what an album could be."
Bruce Springsteen comes in at 18 with Born to Run.
The newest entry is this year's Elephant by the White Stripes, landing at number 390. The most current disc in the top 20 is Nirvana's 1991 breakthrough, Nevermind.
Recent albums by Coldplay and The Strokes also made the cut, as did all three Eminem releases and a wide range of hip-hop.