It means Nadal takes the title for the eighth time in succession after an impressively dominant performance against the world number one.
Djokovic looked well below par the entire match as he was broken five times in total. It means Nadal breaks a run of seven straight defeats to Djokovic and provides a massive psychological boost in the build up to Roland Garros.
"It's my favourite tournament in the world," Nadal said on centre court after Monaco's Prince Albert handed him the trophy. "You make me feel incredible feelings."
Nadal struck early as he broke in the third game of the opening set. A piercing backhand winner up the line got the crowd on their feet for the first time and Djokovic followed it with a poor backhand that drifted wide to gift the Spaniard the game.
Djokovic was strangely off colour, hitting more than twice as many unforced errors as winners. He managed to cling to his following three service games, but Rafa once again broke to take the set as the Serbian hit a succession of backhands long.
Once again the break came early in the second set for Nadal as the errors continued to fly off his opponent's racket. Djokovic's usually fearsome backhand completely broke down as he failed to get over the vicious top spin applied by Nadal.
It wasn't all due to Djokovic's lack of form though. Nadal was at times back to his astonishing best, and the point of the match came as he got the double break. The Spaniard retrieved ball after ball, finally lobbed Djokiovic, then slotted away the follow up, leaving his opponent rooted to the spot.
There was brief hope for Djokovic as he broke immediately back to love in the fifth, but Nadal did the same in the sixth game to regain the double break. By now Djokovic had thrown in the towel and it was a simple task for Nadal to serve it out, an ace a fitting way to take the title.
"I'm sorry about my performance today," said Djokovic, who is based in Monaco. "Congratulations to Rafa, he deserves to win. Me, I'll be back next year."