Serbia's world number one claimed a double break as he cruised into a 5-0 lead in the opening stanza of a rain-affected final, although Nadal did break back late in the set.
The second set was closer, although Djokovic dominated the tie-break to end a 46-match winning run at the clay-court event for former world number one Nadal, who had won the last eight tournaments here.
Nadal had also gone 81 straight matches without defeat on clay during the month of April, and was on a 19-match unbeaten run since his after his return from a knee injury that sidelined him for nine months.
Despite the defeat, the Spaniard was gracious in the post-match presentation: "Congratulations for winning my favourite tournament," he told Djokovic.
The Serb was also magnanimous in victory, saying: "Rafa, thank you for allowing me to win it once. I couldn't ask for a better start to the clay season."
Djokovic celebrated his 14th Masters crown and became the first player to defeat Nadal in three different finals on clay, having already beaten him in Madrid and Rome in 2011.
Monaco-based Djokovic, who made a late call to participate in the tournament after injuring an ankle while on Davis Cup duty two weeks ago, produced a superb performance to outplay Nadal on the picturesque centre court that has been the Spaniard's stage since 2005.
After light rain delayed the start of the final for 45 minutes, Djokovic punished an error-prone Nadal with a blistering start to the first set.
The match had little in common with last year's Monte Carlo final, when Nadal overwhelmed Djokovic 6-3 6-1 in the first big clay-court event of the season a month before he secured his seventh French Open crown.
Nadal, who took a month-long break before the tournament after winning three titles following his return from seven months out with a knee injury, saved five set points on his own serve and fought back to 5-2, only to hand his opponent the set with a double fault.
A more aggressive Nadal put Djokovic under pressure by taking a 4-2 lead in the second set.
But Djokovic dug in to level at 4-4, and after another exchange of breaks the Serbian ran away with the tie-breaker 7-1.
Nadal admitted he lacked the physical dominance of old, but said he was delighted with where he was fitness-wise after his long-term injury problems.
"I need to put in a little bit more physical performance," Nadal told a news conference. "That's the real thing - to play all the points with the same intensity. I get too tired to play with that intensity, earlier than when I used to.
"Five finals in a row. If you had told me that four months before, I would have cried for emotions, no? I'm very happy to be able to play against the best players of the world and play with real chances.
"I think for me it was a positive week...I didn't practise in Mallorca (his home base). I just practised here before the tournament. With not much preparation, I was able to play in the finals."
Djokovic has had his own relatively minor injury problems, with an ankle issue almost forcing him to withdraw from Monte Carlo.
"I cannot be happier than I am in this moment knowing what I've been through the whole week, actually two weeks," he said in reference to twisting his ankle in a David Cup match against the USA.
"If somebody told me 10 days ago I'd be winning the trophy, I wouldn't think it's so realistic, to be honest."