The six-times world champion, who also sealed victory in the 10km pursuit, recovered from a shaky first round of shooting to complete the course in 35 minutes 19.6 seconds.
In dazzling sunshine, the 23-year-old Neuner began smiling a few metres before she crossed the finish line with her arms raised in triumph, edging out Russian Olga Zaitseva by 5.5 seconds.
Germany's Simone Hauswald, who led after the second round of prone shooting, had to settle for the bronze after being pipped by the Russian in a tight sprint finish.
"I think I need to sit down for a while before I fully realise what I've done," a beaming Neuner said.
"At the last shooting, I really fought for it. Then all of a sudden, there was only Simone and the Russian (Zaitseva) in front of me so I started the turbo."
Neuner surged into an early lead after the three-row massed start, the skiers looking like giant stick insects as they bobbed and weaved their way along the uphill stretches.
However, the German missed once in the first round of prone shooting and slid back into 17th spot while Hauswald took over at the top after making no mistake with her first 10 targets.
Hauswald, competing in her first Olympics, faltered with two misses in the first session of standing shooting to surrender the overall lead to veteran Russian Olga Medvedtseva.
Zaitseva, who won gold in the 4x6km relay at the 2006 Turin Games, charged ahead with a flawless display in the last shooting round before Neuner regained control.
The German had clawed her way back from eighth place after the third session of shooting and she surged ahead of the pack over the final 2.5km stretch.
With German flags waving in the packed stadium and her supporters sounding horns and ringing cowbells, Neuner skated triumphantly to the finish line.
Neuner, who in 2008 became the youngest ever women's World Cup overall champion, also scooped silver in the 7.5km sprint.
World Cup leader Helena Jonsson of Sweden has failed to produce her best at the Vancouver Olympics and came home 10th on Sunday.
Place of birth: Garmisch-Partenkirchen, Germany
Residence: Wallgau, Germany
Previous Olympic results:
Gold medallist, 2010 Winter Olympics, 10km pursuit
Silver medallist, 2010 Winter Olympics, 7.5km sprint
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
Champion, 2007/08 World Cup, overall Silver medallist, 2009 World Championships, 4x6km relay
Neuner raised her Olympic medal total to three at the Vancouver Games with a second gold in the 12.5km mass start.
She started biathlon at age nine and left school when she was 16 years old 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 German female athlete of the year in 2007, the year she won three-gold medals at the World Championships.