Parkinson secured the crown following Kelly Slater's semi-final defeat to Josh Kerr, before the Australian went on to beat compatriot Kerr in the final and end the season on a high.
The 31-year-old led the rankings heading into the event on the island's North Shore and once he and Slater made the quarters there, Parkinson needed to finish a place ahead of the American to win the 2012 title.
Victory for Parkinson, who has finished as overall runner-up on four occasions during his 11-year career on the tour, ensured he finally shed his 'nearly man' tag.
“I'm had some ups and downs, I've had some injuries ... I've been to hell and back and this makes it so much sweeter,'' Parkinson said.
Parkinson's route to glory took in a quarter-final victory over 2001 world champion C.J. Hobgood before he bested Hobgood's twin brother Damien in the semis.
In the final - a battle between two Australians - Parkinson, revelling in his new status as world champion, was too good for Kerr.
"I felt like a champ today when I woke up," Parkinson added. "I've not won an event this year, but this is where I wanted to stand at the end of the year. I can't describe what this feels like. It's everything you dream of."
The Pipe Masters was Parkinson's first event title of the season, although he has been deadly consistent throughout the campaign. His worst finish was a ninth place.
Slater paid tribute to the new champion.
"Everything kind of went Parko's way since the last few events," the 11-times world title winner said. "He's always in the title talk and is just an amazing surfer. He's the guy who makes it look easy - ultra smooth. He's just great."
1 – Joel Parkinson (AUS) 17.17
2 – Josh Kerr (AUS) 14.83
SF 1: Joel Parkinson (AUS) 17.30 def. Damien Hobgood (USA) 14.63
SF 2: Josh Kerr (AUS) 11.13 def. Kelly Slater (USA) 4.90
QF 1: Damien Hobgood (USA) 9.83 def. Sebastian Zietz (HAW) 9.17
QF 2: Joel Parkinson (AUS) 12.50 def. C.J. Hobgood (USA) 9.40
QF 3: Josh Kerr (AUS) 15.00 def. Yadin Nicol (AUS) 12.17
QF 3: Kelly Slater (USA) 18.73 def. Shane Dorian (HAW) 18.20
ROUND 5 RESULTS:
Heat 1: Damien Hobgood (USA) 8.23 def. Kieren Perrow (AUS) 3.26
Heat 2: C.J. Hobgood (USA) 13.94 def. Dane Reynolds (USA) 8.00
Heat 3: Yadin Nicol (AUS) 13.00 def. Gabriel Medina (BRA) 12.00
Heat 4: Kelly Slater (USA) 19.27 def. Miguel Pupo (BRA) 10.66
ROUND 4 RESULTS:
Heat 3: Josh Kerr (AUS) 14.57, Gabriel Medina (BRA) 14.10, Kelly Slater (USA) 8.10
Heat 4: Shane Dorian (HAW) 6.53, Miguel Pupo (BRA) 5.83, Yadin Nicol (AUS) 4.23
2012 ASP WCT Top 5:
1 – Joel Parkinson (AUS) 58,700 pts
2 – Kelly Slater (USA) 55,450 pts
3 – Mick Fanning (AUS) 47,000 pts
4 – John John Florence (HAW) 44,350 pts
5 – Adriano de Souza (BRA) 42,350 pts
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- Kelly Slater