Experimental novelist and biographer honoured at the Edinburgh International Book Festival
MacCarthy won the the biography category with her life of Edward Burne-Jones, The Last Pre-Raphaelite, while Powell won the fiction prize with his latest novel, You and I.
Speaking at the event MacCarthy said that writing the book was "pure enjoyment from start to finish".
"I'm thrilled and excited to have won this wonderful prize," she said, "which I think of as one of the most serious literary prizes still in existence."
Powell thanked the students who had chosen his book and the fiction category judge, Dr Lee Spinks, for "ratifying the decision".
MacCarthy's biography of British artist and designer Edward Burne-Jones was praised for its "sharp focus" by category judge Dr Jonathan Wilde, while Spinks hailed the originality of Powell's novel, a freewheeling dialogue between two old men which runs over subjects from fishing to childhood, from movie stars to death.
The James Tait Black prizes are Britain's oldest literary awards, established in 1919. Postgraduate students and staff from the University of Edinburgh's literature department choose the prize, with each student reading 12 books. Staff members Wilde and Spinks decided the shortlist and final prizes. Each winner is awarded £10,000.
The University of Edinburgh's literature department celebrates its 250th anniversary this year with a search for the best of the James Tait Black prize. An overall fiction winner from the prize's 93-year history will be awarded in December at a ceremony in London.