At 20 years and one month, Alexander Zverev is the youngest Masters event champion since Djokovic himself won the 2007 Miami Open.
Fearless Zverev, currently ranked 17 in the world but now set to move into the top 10, dominated from the start.
He did not face a break point and broke the 12-time major winner in the first game and twice in the second set.
Djokovic received a code violation for an audible obscenity in the seventh game of the second set, and later double-faulted to hand Zverev match point.
A long backhand by the Serb, who will celebrate his 30th birthday on Monday, subsequently ensured victory to his highly-rated opponent.
Djokovic’s semi-final win over Dominic Thiem had hinted he was close to recovering his best form after a poor year, culminating in the departure of his entire coaching staff earlier this month.
But Zverev was composed throughout and won in one hour and 21 minutes.
“It’s such an honour being on the court against one of the best ever players,” said Zverev after his victory.
“If I have half the career Novak has had, I will be just fine.”
Referring to the French Open, the second Grand Slam of the year, which begins on 28 May, he added: “I’m sure he will be one of the favourites in Paris.”
Djokovic will need to raise his game having hit 27 unforced errors to his opponent’s 14, but hinted at a big future for the German.
“You are definitely on a great path. You played fantastic and deserve it,” he said.