It was his second title in Munich - he beat Mikhail Youzhny in 2007 - and first of the season.
The home fans' favourite claimed a tight opening set after a tie-break.
Croatian Cilic's first serve suffered a meltdown in that set, with him landing only 30 per cent of them in compared with the German's 73 per cent - and he only claimed one ace more than his opponent. Both players broke serve once.
In the second set Cilic got his first-serve percentage up to 52, but was unable to prevent Kohlschreiber from converting his one break chance - as he had in the first set.
World number 24 Cilic had four break points but all were saved by the 34th-ranked German, who now holds a 5-3 record in the head-to-head between the pair.
Cilic finished runner-up in Munich in 2010, losing to Youzhny.