Irishman Harrington, a late addition to the elite four-man field, fired a four-under-par 67 at Port Royal Golf Course in Southampton for a nine-under total of 133 in the 36-hole event.
Two strokes ahead of Masters champion Bubba Watson overnight, Harrington mixed five birdies with a lone bogey at the par-four last to fend off American Simpson, who closed with a best-of-the-week 65.
It was the 41-year-old Irishman's first victory since the 2010 Iskandar Johor Open on the Asian Tour, and a case of third time lucky for him at the Grand Slam of Golf.
Harrington had twice been beaten in play-offs at the event which brings together the winners of the year's four Majors, losing to Argentina's Angel Cabrera in 2007 and being edged out by American Jim Furyk in 2008.
"It was unfinished business for me, having lost in two play-offs, so it was nice to come back and win it now," Harrington said after becoming only the second European to win the title, emulating 1991 champion Ian Woosnam of Britain.
"It feels good. I haven't won in a while. Winning is a habit and it's nice to do it.
"I believe I'm playing really good golf. I believe that there's good stuff in my game already, and I believe that there's other stuff that I need to tidy up. I see a lot of good things happening."
Harrington swiftly accepted an invitation to compete at Port Royal after Open champion Ernie Els withdrew on Saturday because of an ankle injury.
"You've got to come here," he said. "You've got to give yourself the chance. It's a fantastic tournament. Even if I finish fourth here, I'd be quite confident that I made the right decision. It is a bonus to come and win, no doubt about it."
A stroke in front of the charging Simpson at the turn, Harrington effectively sealed the title with successive four-foot birdie putts at the 11th, 12th and 13th which gave him a commanding four-shot cushion.
"From there on, it was very much trying to batten down the hatches and get to the clubhouse," said the Irishman, who won The Open in 2007 and 2008 and the US PGA Championship, also in 2008.
"Once I holed my (par) putt on 16, I felt it was all over at that stage. It was just a question of getting the last two holes played without too much harm, too much damage being done."
Simpson applauded Harrington's decisive birdie run shortly after the turn.
"He was playing well and he made the putts you've got to make," said the American who won his first Major title at the US Open in June.
"The turning point for us was kind of the 10-through-13 stretch. I had some good (birdie) looks and played them even, and he played them three under. He played great."
Left-hander Watson carded a roller-coaster 71 to finish a distant third at three-under 139, level with fellow American and defending champion Keegan Bradley (67).
Bradley, winner of last year's US PGA Championship, gained his spot in the field as the first alternate after Northern Ireland's Rory McIlroy pulled out due to a scheduling conflict.
McIlroy, who clinched his second Major title by a staggering eight shots at this year's US PGA Championship, had already committed to the European Tour's BMW Masters, being played this week in China.
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