The Australian veteran rolled back the years to see off the big-serving second-seeded Croatian in Newport, eventually coming through to win 6-3 6-7 (4-7) 7-6 (7-3) in two and a half hours.
The win continued a positive year for the former world number one, who is enjoying something of a mini-resurgence following victory in Brisbane back in January - his first title in four years.
It also made it third time lucky at the American venue, with the 33-year-old having been a beaten finalist at this tournament for the past two years.
Hewitt almost continued his habit of losing Newport finals, as he coughed up two match points in the 12th game of the second set.
Karlovic forced a tie-break and went onto force a third set, which saw few opportunities for breaks.
The biggest chance fell the way of the Croatian, who held 0-40 on the Hewitt serve in the second game.
But the two-time major winner got himself out of the hole, and there would be no more break-point chances for the remainder.
Despite such serving dominance, the first two points of the third-set tie-break went against serve.
Hewitt went on to snatch a mini-break for a 3-2 lead, which he consolidated, before he took another point on the Karlovic serve to set up match point at 6-3.
And the Australian only needed one, as he finally broke through at the ATP 250 tournament.