The victory avenged a straight sets defeat four days earlier in the pool stages of the eight man end of season championships.
Djokovic, 31, was the favourite for a record equaling sixth title at the tournament. He had won Grand Slam championships at Wimbledon and the US Open as well as crowns at two Masters 1000 events – esteemed just below the Grand Slams.
The Serb had not lost his service in his four previous matches at the 02 Arena in south-east London. But he cracked for the first time when serving to take a 5-4 lead in the first set.
Zverev then fired down three aces to take the opener 6-4.
“I wasn't returning well,” said Djokovic after the defeat. “I wasn't making him move too much. I was making way too many unforced errors. From 4-4 in the first set, my game really fell apart, to be honest. But credit to him because he played solid.”
Zverev is the youngest winner of the title since a 20-year-old Djokovic claimed the first of his five crowns in Shanghai in 2008.
And Zverev swept to join a roster of illlustrious previous winners impressively. On Saturday in the semi-final, he dispatched the five time champion Roger Federer 7-5 7-6 and he was as clinical against the top seed the following day.
“Obviously it's quite astonishing, winning this title and beating two such players back-to-back, Roger and Novak," said Zverev. “It means so much. I'm incredibly happy and incredibly proud.”