The Serbian won 6-4, 4-6, 6-2 to record his third win over Federer in five meetings this year.
Federer, who had not dropped a set or lost a service game on his way to the final, had his serve broken four times as he lost a final for the third time this year, following defeats at the Australian and US Open.
The match featured an extraordinary 10th game in the first set where Federer saved six set points and Djokovic saved five break points before the Serbian wrapped up the game at the seventh attempt.
At Valencia, Spain top seed Andy Murray dismissed unseeded Russian Mikhail Youzhny 6-3, 6-2 in the final of the Valencia Open on Sunday to clinch a sixth title of the year on his return from injury. The 22-year-old world number four easily dictated the rhythm of the match on the hard court event.
Rezai triumphs
Aravane Rezai won the Tournament of Champions in Bali on Sunday when top seed Marion Bartoli retired with a quad injury after losing the first set 7-5.
The win gave Rezai the second title of her career following success at Strasbourg in May, and lifted her into the world's top 30 for the first time. Bartoli had broken her fellow Frenchwoman to lead 3-2 but failed to serve out the set at 5-4.
