Each player had taken a win apiece in the previous two encounters, with no-one other than the world's current top two having won on the Rome clay since Carlos Moya in 2004.
Djokovic dedicated his 4-6 6-3 6-3 victory to the victims of a flooding disaster in his native Serbia and surrounding countries.
The triumph boosts Djokovic's hopes of overhauling Nadal at the top of the ATP rankings and brought him closer to the Spaniard in their head-to-head record - though he remains behind at 19-22.
Nadal made his intentions clear early on as he won four of the opening five games to put himself in a commanding lead.
But the Spaniard lost the sixth on his own serve and was forced to survive three break points in the eighth as he clung on to take the first set.
Having dropped his opening serve in the second set, Nadal looked to have recovered when he broke back to make it 3-2.
However, the clay specialist went on to win one of the remaining four games - Djokovic levelling matters at a set apiece.
The pair exchanged breaks again in the decider, but, with the scores at 4-3, Djokovic won nine points from 10 to pull into a 30-0 lead at 5-3.
And Nadal sent a forehand long when Djokovic was on match point to give the Serb the title and potentially vital momentum heading into the French Open next week.