Colsaerts overcame Paul Lawrie in the semi-final at Finca Cortesin in Spain, with the former Open champion winning the first four holes only to have his lead cancelled out by the 14th before a final-hole birdie from the Belgian forced sudden death after the Scot had moved ahead again.
Lawrie missed from 18 feet on the first, allowing Colsaerts to seal a spot in the final from just off the final green.
McDowell defeated Rafael Cabrera-Bello by two holes after an hour's delay due to lightning, with the Spaniard's six on the final hole ending any chance of a comeback.
But although Colsaerts, who saw off Justin Rose in the opening round, had his two-shot lead reduced to one by the Northern Irishman heading onto the 18th in the seventh round, the 29-year-old held on for his second European Tour win after success at the China Open last year.
"I had to dig deep all day, the conditions this afternoon were brutal and we had to fight and grind all the way," said Colsaerts, who has had seven top 10 finishes in 11 tournaments this year.
"I can't feel anything right now, to have my name on this trophy next to Major winners and all these players, it's a dream come true.
"When you play Graeme in these conditions you know it's going to be tough because he's (Northern) Irish and plays lots of links golf.
"But I've been playing well for a while now."