The 23-year-old Argos-Shimano sprinter proved that he is the fastest man in this year's race with a commanding win ahead of Italy's Daniele Bennati (RadioShack-Nissan) and Gianni Meersman (Lotto Belisol) of Belgium.
Spaniard Joaquim Rodriguez (Katusha) completed the 168km circuit-style race in the Rioja region of northern Spain to retain his leader's red jersey. Rodriguez leads Britain's Chris Froome (Team Sky) by one second, with compatriot Alberto Contador (Saxo Bank) in third place at five seconds.
Benefitting from yet another perfect lead-out by his Argos train, Degenkolb powered past veteran sprinter Bennati on the closing straight to take his seventh win of the season by half a bike length.
"It was unbelievable and the pace was so fast," Degenkolb said after his second win in four days. "My team brought me in such a good position and I just needed to sprint to the line. I'm speechless. I can't believe it. I can't describe how it feels."
Still in the hunt for his first win of the season, Bennati launched the final sprint early and looked on course for victory until he was outdone by Degenkolb's late surge. Belgian Meersman completed the top three, with the French national champion Nacer Bouhanni (FDJ-BigMat) finishing fourth and Italian Elia Viviani (Liquigas) fifth.
Degenkolb now leap-frogs Tuesday's winner of stage four, the Australian Simon Clarke (Orica-GreenEdge), to return to the top of the green jersey points standings. Clarke will put on the blue polka dot jersey in the king of the mountains competition, which he leads Dutchman Pim Ligthart (Vacansoleil-DCM) by five points.
A largely uneventful day on what has so far been an enthralling race saw Spanish rider Javier Chacon of the Pro Continental Andalucia team attack inside the opening kilometre of the first of eight 21km laps around the town of Logrono.
Riding his debut Grand Tour, 27-year-old Chacon - who wore the polka dot jersey for one day after being part of the main break in Sunday's second stage - built up a maximum lead of almost 12 minutes under the fierce Spanish sun.
But once Argos-Shimano and the Katusha team of race leader Rodriguez combined on the front of the peloton that lead soon came tumbling down. Chacon was caught with 30km to go on the penultimate circuit.
There followed a nervous and fast closing lap as the teams of the main sprinters jostled for positions ahead of the expected bunch sprint. The pace was too high for anyone even to attempt a counter attack - and in the end Degenkolb proved just too strong for his rivals.
The Vuelta continues on Thursday with the rolling 175.5km stage six which is concluded with two Cat.3 climbs including the punchy uphill finish at Jaca in the foothills of the Pyrenees.