Some 10.74 million vehicles from VW or its subsidiaries ranging from Porsche and Audi to Skoda and Seat rolled out of dealerships last year - an increase of 4.3 percent over the previous year, the carmaker said.
"We are grateful to our customers for the trust these figures reflect," chief executive Matthias Müller said in a statement.
VW's sales look likely to outstrip Japanese rival Toyota's, whose annual figure for last year is expected to stand at around 10.35 million units.
Nevertheless, the Wolfsburg-based group is still facing a growing challenge from the Renault-Nissan-Mitsubishi alliance, which is targeting 10.5 million combined shipments in 2017.
VW's strong performance underlines its recovery from the blow it was dealt two years ago, when it admitted in September 2015 to cheating regulators' emissions tests on millions of diesel cars worldwide.
It has since begun to rebuild its reputation in some of the world's most important markets, with Chinese sales adding 5.1 percent to 4.2 million vehicles last year and US sales rising 5.8 percent to 625,000 vehicles.
Growth was more spectacular in South America, at 23.7 percent, but sales only reached 522,000 units in absolute terms.
Meanwhile, sales in Central and Eastern Europe including Russia rose by 13.2 percent to 745,000 vehicles.
But growth in Western Europe was more sluggish, with shipments up 1.4 percent at 3.6 million units.
Looking to the group's different brands, generalist VW booked an increase of 4.2 percent to 6.2 million units, while Skoda added 6.6 percent to 1.2 million and Seat 14.6 percent to 468,000 units.
Luxury Porsche shipped 246,000 cars, up 3.6 percent on the year, while Audi fell behind high-end rivals BMW and Mercedes-Benz with 0.6-percent growth to 1.9 million sales.
Truckmaking units MAN and Scania both reported 11.6-percent growth.
Looking to the future, Müller said VW was making "decisive investments in the mobility of tomorrow".
VW announced in November that it would invest more than 34 billion euros ($41 billion) in future vehicles and technologies - such as electric and hybrid cars, autonomous driving and digitalisation - by 2022.