Roger Federer, A 34-year-old Swiss, who knocked out Britain's Andy Murray in the semi-final, recorded a 7-6 (7-1) 6-3 win.
Djokovic lost the first set on a tie break, and the 28-year-old Serb then double faulted at break point in his first service game of the second set.
Federer, who will now be the number two seed at the US Open, held serve to win in one hour 30 minutes.
"We really get the best out of each other," said Federer, who made it an 87th tour-level title.
"We have improved a lot playing against each other over the years.
"It's very special for me. I will try my best to come back for many years to come."
With the victory, Federer denied Djokovic from completing the set of all nine ATP Masters titles and took a 21-20 edge in career head-to-head meetings.
"I really hope he (Djokovic) can win here one day," added Federer. "He deserves it."
The win will also give Federer confidence going into US Open, which begins on 31 August, where he will be seeking a sixth title at Flushing Meadows and his first since 2008.
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