The Queen of the Classics came down to the death for the first time since 2008 and the Swiss came around the outside of the Belgian to become the ninth rider to win this race at least three times.
A bike's length was the victory margin for the Swiss at the end of the 254.5km route as he become the second rider to win the Ronde van Vlaanderen and Paris-Roubaix in the same year twice.
After matching his achievement from 2010, and also winning his fifth cobblestone classic to equal Roger De Vlaeminck, Rik Van Looy and Eddy Merckx, 'Sparcatus' fell off his bike and had to be helped away by Radioshack-Leopard staff.
The 111th edition of the Hell of the North lived up to its' billing with a number of crashes which included Omega Pharma Quick Step's Stijn Vandenbergh hitting a fan and crashing out while in a four-man lead group inside the final 20km.
That left his Czech team-mate Zdenek Stybar in the lead with Cancellara and Vanmarcke but the former world cyclo-cross champion also collided with a fan in the closing stages and had to settle for sixth.
His team-mate Niki Terpstra took third, 31 seconds behind the winner, beating Greg van Avermaet (BMC) and Damien Gaudin (Europcar) in a sprint for the final podium position.
Stybar had to settle for sixth, just ahead of Sebastian Langeveld (Orica GreenEdge) and Juan Antonio Flecha (Vacansoleil-DCM).
The cobblestone Monument was as incident-packed as ever with an average speed of 47km/h and Yoann Offredo crashing heavily into a traffic island in the middle of the rode even before the peloton hit the first of 27 sections of pavé which determine this event.
The Trouee d’Arenberg, with 95km remaining, is the most famous and hazardous of those cobbles and Gert Steegmans (Omega Pharma Quick Step), Matthew Hayman (Sky), Stuart O'Grady (Orica GreenEdge) and Clement Koretzky (Bretagne-Séché) lead the peloton by 1:30 at that point.
Steegmans and Hayman pressed ahead and were joined by BMC's Michael Schar on the exit of cobbled sector 12 but Cancellara raised the tempo at the 200km mark and forced the selection as a group of 13 riders emerged after sector nine.
After 2012 runner-up Sebastien Turgot punctured, the dozen split amidst a flurry of attacks and three groups of four formed with Cancellara in the last of those and apparently under pressure after midweek crashes in Scheldeprijs and in a reconnaissance ride.
But as Gaudin, Vanmarcke, Langeveld, Vandenbergh, Van Avermaet, Flecha, Stybar and Luca Paolini formed an eight-man lead group, Cancellara bridged the gap to them on his own with 28km remaining.
As he made contact, Vandenbergh and Vanmarcke attacked and held a lead of 35 seconds prompting Cancellara to attack on sector six with race debutant Stybar the only man able to stay on his wheel.
The Carrefour de l’Arbre, the fourth sector and the last rated at the most difficult level of five-stars, saw Vandenbergh crash into a fan at the side of the road and hit the cobblestone hard to end his challenge.
Then Stybar made contact with another fan whilst riding on the side of the pavé and although his bike handling ability meant he stayed upright, his challenge was over.
That left Cancellara and 24-year-old Vanmarcke, whose victory in the 2012 Het Nieuwsblad is his only professional success, to contest the victory.
They crossed the last three sections of pavé together and although the four-time world time-trial champion make an attempt to shed his rival with 4km to go, they played cat and mouse on entering the Velodrome.
With 52.6km of cobblestones in their legs, it was a battle of sheer toughness as Cancellara sat on Vanmarcke's wheel as they meandered around the banking.
Finally the man from Kortrijk made his move as he looked to emulate injured Belgian compatriot Tom Boonen but it was Cancellara who found one last gasp of energy to grab a famous victory before falling off his bike in exhaustion.
"There was nothing called instinct at the end, it was just a fight," Cancellara, who started the day as the overwhelming favourite in the absence of holder Boonen.
"I went to a level sometimes you don't know how you can do it. I went beyond my limits. I'm happy but I was probably more happy that the race was finished.
"Then I had a minute to lie down on the grass, back to planet earth. I damaged myself probably more than ever."
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- Omega Pharma Quick Step