The Italian is 60 days younger than previous record holder Bernard Gallacher of Britain who was 20 years and 97 days old when he lifted the coveted title in 1969.
Britain's Marc Warren dropped out of a three-man play-off after hitting a wayward drive at the first extra hole and having to play three off the tee.
The trio had all finished on 10-under-par 278 at the European Tour's flagship event after Khan, the 2010 champion, charged through the field with a six-under 66 while Manassero and Warren carded 69s.
Manassero also became only the second Italian to win the trophy, after former Ryder Cup player Costantino Rocca in 1996.
Spanish pair Miguel Angel Jimenez (67) and overnight leader Alejandro Canizares (72) shared fourth place on 279 after another day of sunshine and cloudless skies on the outskirts of London.
"It's been an amazing week," said Manassero at the presentation ceremony after capturing the fourth tour victory of his short career.
"I've always felt something really special about this place and this tournament. Everything has come together this week and I managed to pull it off in the playoff."
Former world number one Lee Westwood, one stroke off the pace overnight and the favourite to scoop the first prize of 791,660 euros,made a fast start with a hat-trick of birdies to the fourth earning a two-shot lead.
The Florida-based Brit's round then unravelled with successive bogeys at the sixth and seventh and a double-bogey seven at the 12th wrecked his chances for good as he struggled to a 73 for 281.
Warren also had a spell when he seemed to have the title within his grasp, especially after he holed a wonder shot from the fairway for a three at the 13th, his fourth birdie in a dynamic four-hole surge.
A bogey at the 15th then dropped him back and he was unable to pick up the birdie he needed over the closing three regulation holes.
Khan, playing for the first time in eight weeks after taking time off to care for his sick wife, produced the round of the day.
His blemish-free 66 contained six birdies including a tap-in effort at the last that prompted loud cheers from the crowd.
Manassero's performance was steady rather than spectacular although he took a lot of confidence from chipping in from the fringe of the green for a birdie at the 13th.
He eventually delivered the coup de grace in the play-off on 18, taking two strokes to reach the green and safely two-putting for victory from 30 feet.
Manassero said he was pleased with the way he handled the pressure in the play-off.
"I was less tense than I was walking the last few holes of regulation because you know you've done what you could for 72 holes," he added.
"The rest is just about trying to hit good shots, trying to make it as easy as possible and see what the other guys do. I managed to hit four good tee shots and on a hole like 18 that's probably the most important thing."
The 40-year-old Khan's hopes were ruined when he found the burn in front of the green with his second stroke with a rescue club.
"After such a long layoff, to come back and lose in a play-off in this fantastic tournament, I can take a lot out of that," said Khan.
"I'm delighted for Matteo. He was great in the play-off - I knew he would be a tough customer and he proved it."
World number 14 Sergio Garcia of Spain, involved in a racism row with Tiger Woods earlier this week, returned a 72 for a five-under total of 283.
South African Ernie Els, who masterminded the recent changes to the West Course layout, ended his campaign in style as five birdies in the last seven holes gave him a 67 for 280.
A crowd of 26,412 turned up for the final round, a tournament record.
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