Saxo Bank-Tinkoff Bank rider Contador had all but made sure of overall victory on the penultimate Bola del Mundo mountain stage on Saturday.
And he completed a brilliant return following his doping ban after three weeks of enthralling racing, while Argos Shimano's Degenkolb pipped Elia Viviani (Liquigas) on the line in the Spanish capital after a 115km flat ride from Cercedilla.
Contador's Spanish compatriots Alejandro Valverde and Joaquin Rodriguez complete the podium at the Vuelta, while Valverde took the points classification ahead of Rodriguez.
"Because of what happened coming in, this victory is very special for me and I have to thank everyone who helped me because I came in without having competed for a long time and things were complicated," Contador said.
"Reflecting on it, there are a lot of emotions that are very strong and that can't be explained with words. It's a big weight off of me.
"This is the result of many months of hard work and an incredible level of self-sacrifice. I feel a real sense of release from pressure, liberated by this win.
"I want to dedicate it to the people who have been with me in the good times and the bad times."
He also won the Vuelta in 2008 alongside that year's Giro d'Italia, and the 2007 and 2009 editions of the Tour de France.
His 2010 Tour title and 2011 Giro victory were taken from him following the conclusion to the doping case. He had tested positive for clenbuterol en route to winning the 2010 Tour but kept racing while he appealed.
Only five riders have won all three Grand Tours: Contador, Bernard Hinault, Eddy Merckx, Jacques Anquetil and Felice Gimondi.
Contador's next objective will be to take part in the world championships, starting with the team time trial event on Sunday in Valkenberg, Netherlands.
Contador, 29, took control of the race leader's red jersey on stage 17 with an unorthodox attack on what many thought would be a day of little consequence.
Having tried and failed to shake off Rodriguez (Katusha) on the climb of the Cuitu Negru on Stage 16 - prior to the Vuelta's second rest day - Contador surprised the whole peloton with a stinging attack more than 50km from home.
He rode to the finish alone to take the stage win and the race lead atop Fuente De. Behind, Valverde (Movistar) followed Contador's lead to jump away from the bunch and gain some time, moving him into second place in the GC, with Rodriguez demoted to third.
Contador's lead of 1:35 did seem to be under threat on Stage 20 as the riders tackled the ferocious climb of the Bola del Mundo. Rodriguez and Valverde both attacked the Madrileno, but Contador held his nerve to limit his losses on the last three kilometres which featured ramps of up to 23%.
This is how they would finish and they rode into Madrid under a ceasefire, as is customary on the Grand Tours. The past three weeks have seen Contador, Rodriguez and Valverde light up the race with aggressive, counter-attacking racing, but Sunday was a day for the sprinters to battle it out.
A group of six men went clear as the riders entered Madrid, but were kept in sight of the bunch and drawn back with just one lap of the 5.7km finishing circuit remaining. Team Sky took control on the front of the bunch and held on for much of the final lap, but in the last kilometre Argos Shimano found their spot and dragged Degenkolb into position from where he rode on to make it a record-breaking five stage wins at the Vuelta.
"Me and the team made history at this Vuelta, so we are so happy about that," Degenkolb said.
"I suffered a lot on the final climbs of the race, but I managed to get through to the finish okay.
"I'm the first German to win so many stages in a single Vuelta, and I'm very proud of that."
Viviani (Liquigas) took second with Daniele Bennati (Radiohack Nissan) third.
Simon Clarke (Orica GreenEdge) collected the mountains classification following his opportunistic ride on Saturday while Movistar won the team classification from Euskaltel Euskadi. It is a mark of how much climbing there was in the 2012 edition of the Vuelta that despite collecting five stage wins, Degenkolb could only manage fourth in the points classification behind Valverde, Rodriguez and Contador.
Tour de France runner-up Chris Froome of Britain was 10:16 off Contador's winning pace having won bronze in the time trial at the London Olympics in between the Tours.
"It's slightly disappointing not to come away with more – obviously we had high ambitions coming here," said Froome.
"But having said that I'm not disappointed with how we rode and how I rode. I know I gave it everything and I know the team did a fantastic job to look after me and support me.
"It's been a huge learning process. I think there's so much we can take away from this race. Personally I now know where my limits are in terms of doing two Grand Tours back to back. I know a lot more about the competition that wasn't at the Tour de France this year and will be at future editions and races next year.
"For me it's been the first time leading the team and being in a position where I need to tell the guys around me what I need to get me though the race as best as possible.
"I'm in long need of a rest now! I'll definitely put the feet up for a few days and, if I can come around in time, go to the world championships road race. The main emphasis now for the next few days will just be switching off and relaxing."
The 2012 Vuelta marked a refreshing change to the style of racing we have become accustomed in Grand Tours. The difficult terrain kept things interesting while the riders battling for the top GC positions were more than willing to do most of the work themselves rather than constantly relying on team-mates for help.
Prior to this year, the Vuelta had been third most popular among the three Grand Tours and while this may not change from this edition alone, 2012 may have awoken a sleeping giant.
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