The Spanish Honda rider was clear of the field after 13 of the scheduled 20 laps at a rain-swept Sepang International Circuit when the race was red-flagged because of dangerous conditions.
Pole-sitter Lorenzo held on to second place on his Yamaha as the weather deteriorated with world champion Casey Stoner crossing the line in third place on another Honda.
With torrential rain continuing to lash the circuit, the race could not be re-started, giving Pedrosa his first victory in Malaysia as the Spaniard continued his audacious late-season title push.
"In the beginning, I was trying to follow Jorge, in the first lap he was very fast. But the track was not so bad, so I could get some rhythm and tried to be constant on the lap time," Pedrosa said.
"I'm very, very happy today. It's my first ever win in wet, it's a great feeling."
The win enabled Pedrosa (307) to cut fellow Spaniard Lorenzo's (330) lead in the championship standings to 23 points with two more races remaining and a maximum of 50 points available.
Pedrosa started behind Lorenzo in what was declared a wet race but was soon breathing down the 2010 world champion's neck as the pair pulled clear of the pack.
The 27-year-old snatched the lead just past the scheduled halfway point and never looked like being challenged by Lorenzo as several riders crashed out on the slippery surface.
Lorenzo was lucky to survive a heavy wobble seconds before the race was red-flagged as his bike threatened to lose control at the hairpin before the home straight.
"I'm very, very lucky, because once you drop here, it means a much more difficult championship... the second place is a very good result for the championship," Lorenzo said after failing to convert pole into a victory for a sixth consecutive time.
Australia's Stoner recorded his first podium finish since returning from an ankle surgery in August while Ducati's Nicky Hayden finished fourth, ahead of team mate Valentino Rossi.
Stoner said he lacked confidence after the injury and could not match the early pace of his Honda and Yamaha rivals.
"I was just trying to keep myself ahead of people, trying to get nice, clean exit but there was no way I could run at the pace of these two in the beginning."
Things, however, could have been different had it been a full race, Stoner said.
"When the rain started coming down, it's always sort of my playing ground," he added.
"When it's heavy rain, we normally find a bit of higher pace than everyone else. Honestly, if the race had gone through to the full distance, I think we had a very good chance of winning it."
Yamaha's Ben Spies suffered a premature end to his race following a heavy crash and the rider was taken to the medical centre to check on a shoulder injury.