Trailing Slovakia's Anastazia Kuzmina by two seconds after Sunday's 7.5 km sprint, the 23-year-old Neuner took control after a flawless display in the first two rounds of prone shooting and never relinquished her grip.
Grinning broadly all the way down the finishing stretch, Neuner completed the course in 30 minutes 16 seconds, with Kuzmina finishing 12.3 seconds behind.
"I really tried to do a tactical race today because I was confident I was in good shape. So I concentrated on my shooting," a beaming Neuner, wearing her trademark black and grey leggings, said.
"On the last shot I said to myself: ‘Okay, with this I could be Olympic champion'. And then I missed the target!"
Frenchwoman Marie Laure Brunet took the bronze after a perfect shooting display while World Cup leader Helena Jonsson of Sweden, a disappointing 12th after the opening sprint event, came home in 14th.
"I did everything I could and obviously my flawless shooting today was very necessary," Brunet, 21, said. "The snow was pretty slow out there."
Neuner, who in 2008 became the youngest ever women's World Cup overall champion, made a perfect start after the race began in dry conditions following heavy early morning snow.
With her fans in the packed stadium cheering wildly, she shot clean in the first two rounds of prone shooting to lead Kuzmina by 23.6 seconds.
Despite missing one target in each of the two rounds of standing shooting, Neuner held off a late surge by Kuzmina with strong skiing and pumped her fists in jubilation as she charged to the finish.
Sweden's Anna Carin Olofsson-Zidek rocketed into fourth place after starting the day in 20th.
Place of birth: Garmisch-Partenkirchen, Germany
Residence: Wallgau, Germany
No previous Olympic results:
3x gold medallist, 2008 World Championships, 12.5km mass start, mixed 2x6 and 2x7.5km relay, 4x6km relay
3x gold medallist, 2007 World Championships, 7.5km sprint, 10km pursuit, 4x6km relay
Silver medallist, 2009 World Championships, 4x6km relay Champion, 2007/08 World Cup, overall
Neuner started biathlon at age nine and left school aged 16 to pursue it professionally. In 2008 she became the youngest women's World Cup overall biathlon champion.
The 23-year-old customs officer was voted 2007 German female athlete of the year following her three-gold medal haul at the World Championships that year.