The second-ranked Federer broke a sluggish Nadal once in both sets before firing his sixth ace to win his 15th Masters Series title on the second match point. Federer also won here in 2006 when the event was played indoors on a hard court.
"There are no positives, there is little to analyze," said Nadal, the 2005 champion. "He broke and broke and I went home."
It was only the second victory Federer has on clay against his top rival, with the other coming at the Hamburg final two years ago. The win also ended Federer's five-match losing streak to Nadal, a stretch that included losses in the finals at Roland Garros, Wimbledon and Australia.
Federer called his first win over Nadal since the 2007 Masters Cup "very satisfying." Especially after being left in tears in February following his defeat to Nadal at Melbourne.
"I thought I took all the right decisions today. In the end it was a perfect game for me," the Swiss player said after drawing even with Nadal in Masters titles. "(You) stay positive and I did. I got the win I needed badly."
Earlier, top-ranked Dinara Safina of Russia won her second straight title on clay by beating Danish teenager Caroline Wozniacki 6-2, 6-4 in the women's final.
Federer also ended Nadal's 33-match clay winning streak. The Spaniard will be going for a fifth straight title at the French Open beginning on May 25.
"I don't think he's going to take any damage away from this," Federer said. "I'm sure he's going to be rock solid in Paris again."
Nadal sounded so after only a fifth loss in his last 155 matches on clay.
"To me, this tournament has nothing to do with Paris. This tournament is practically another surface compared to Paris," said Nadal, who was troubled with the odd bounces and faster pace brought on by higher altitude. "The conditions favored him more than me."
Only Ivan Lendl and John McEnroe have met in more finals - 20 - as the pair played for a 16th time with Nadal having earned 11 titles. He leads the overall series 13-7.
Federer and Nadal joked after receiving their trophies in a scene that contrasted with the one in February when Federer was in tears after losing to Nadal in the Australian Open final.
"Sorry to spoil the party," Federer told the crowd from the Manolo Santana center court, where the rivals played in front of Nadal's biggest supporters for the first time.
Federer, who is also the only top-10 player to have ever beaten Nadal on clay, saved two Nadal break chances before converting his first try in the ninth game.
Federer slapped a forehand winner down the near line to set up the point and converted when Nadal weakly backhanded into net. Federer served out to love to take the opening set.
"He was simply better than me," Nadal said.
Nadal's grueling semifinal win against Novak Djokovic took its toll as he failed to reach many balls he would normally get.
"It doesn't help to play four hours yesterday," Nadal said.
Federer applied a soft drop to set up a break chance in the fifth game of the second set and took a 3-2 lead after Nadal hit long.
Nadal rallied the 12,500 spectators at the "Magic Box" after setting up a break chance in the final game, but the Spaniard slapped his cross-court backhand wide.
Federer netted his first match point but replied with his 25th winner to close it out. Nadal, who has won five titles this season, had only 12 winners.
"Things are falling into place and of course it's the right time to get the victory," said Federer, who will try for his first French Open title after a first Masters title since Cincinnati in 2007.
Safina overpowered her 18-year-old opponent with 24 winners and three break points for her 11th career title.
"Since I became No. 1 I'm playing better and better," the 23-year-old said.
Wozniacki, facing a top-ranked player for the first time, will become the first Dane to crack the top-10 in next week's rankings after reaching her third final of the season.
Safina is 14-1 on clay this season and will go into Roland Garros buoyed by her recent success on the surface after finishing runner-up at the Australian Open and Stuttgart.
"I was feeling very comfortable from the start of the match and I was trying to be as aggressive as I could," she said. "But even in the key moments I was very strong."