The Swiss also recorded his 65th ATP tournament win to move ahead of Pete Sampras, though he still trails Jimmy Conners, Ivan Lendl and John McEnroe in overall career titles.
It was Federer's second win over world number three Djokovic in a month and his fourth title of a year, suggesting reports of his demise may have been premature.
Djokovic, who interrupted Federer's run by beating him in last year's final in Basel, rued the start to the third set, when he said he lost his focus.
Federer started with a superb service return on the first point and had two break points in the first game but hit both into the net.
The Swiss himself had to save two break points in the second game, the only glimmer of a chance Djokovic had in the first set, before breaking in the third. World number two Federer produced some delightful strokes including a superb backhand drop from near the baseline in the fourth game.
But he seemed to lose his composure at the start of the second set and was broken in the second game as he produced a flurry of unforced errors. There were some outstanding rallies, one ending with a stunning crosscourt drive from the Serb and another a perfect smash by Federer from a Djokovic lob which nearly hit the ceiling.
Meanwhile, David Ferrer clinched his second title of the year and improved his chances of making this month's World Tour finals when he dismissed Spanish compatriot Marcel Granollers 7-5, 6-3 to win the Valencia Open on Sunday.
The world number eight, victorious in Acapulco in February, used his speed and tenacity to good effect against the powerful Granollers. Ferrer is well placed to clinch one of the three remaining berths at the November 21-28 ATP World Tour finals in London, for which Rafael Nadal, Federer, Djokovic, Andy Murray and Robin Soderling have all qualified.
As of Saturday, Tomas Berdych, Andy Roddick, Fernando Verdasco, Mikhail Youzhny and Juergen Melzer could also still make it, with more ranking points available at next week's Paris Masters event.
Meanwhile, British wild card pair of Andy and Jamie Murray scored a hard-fought 7-6, 5-7, 10-7 win over third-seeded Indo-Belarusian pair of Mahesh Bhupathi and Max Mirnyi in the doubles’ final.
Bhupathi and Mirnyi had scored a 7-6 (7-3), 6-4 win over Lukasz Kubot and Oliver Marach in their semifinal encounter on Saturday.
Ivanovic triumphant
Ana Ivanovic ended the season on a positive note by defeating Alisa Kleybanova 6-2, 7-6 in the final of the Tournament of Champions in Bali on Sunday. Ivanovic weathered some heavy hitting from her Russian opponent before breaking to lead 4-2 and won the final 11 points of the first set. Kleybanova broke to lead 2-1 in the second, but Ivanovic immediately broke back with a stunning winner down the line, and her resilience under pressure, together with some fine serving, continued to give her the advantage.
Ivanovic faced a crisis at 5-5, but saved two break points and went on to claim victory with her eighth ace of the match. The last few weeks have shown a remarkable turnaround for the Serbian former world number one, who has struggled since winning the French Open in 2008. Ivanovic saw her ranking sink to 65 in July but her fortunes began to improve in August.