It was Murray's first Masters title on clay, a week after his maiden career tournament victory on the red surface at the Munich Open.
Murray dictated most of the long rallies, which lasted up to 24 strokes, displaying a level of confidence that has often been lacking for the Briton on clay.
He broke twice to take a 4-0 lead in the second set and clinched the win when Nadal sent a forehand return into the net.
"For me it was obviously a very tough match, you know winning against Rafa on clay is extremely difficult, one of the hardest things in tennis," Murray said. "From my side it was a very good performance. I'm sure Rafa feels he could have played much better. But from my side, I couldn't have done much more."
It was Nadal's fourth loss on clay this year, raising questions about his ability to win a 10th French Open title this year. Still, his play this week was an improvement compared to the Barcelona Open last month, when he lost to Fabio Fognini in the third round.
"This wasn't the game I wanted to play, but I tried to the very end," Nadal said. "Still, it was a very important and positive week for me, I recovered sensations that I hadn't felt in a long time."
The trophy was presented by Spanish tennis great Manuel Santana, who celebrated his 77th birthday Sunday.
Murray remained undefeated since he married his long-time girlfriend Kim Sears at Dunblane Castle in Scotland last month. When signing his name on a glass sheet in front of one of the cameras after the match, the 27-year-old Murray added: "Marriage works!"
"Obviously the tennis has gone well (since the wedding)," Murray said. "You're happy and that helps your performances on the court."
Murray, who has been free from the back pain that troubled him in previous seasons, moved well throughout the match and forced Nadal to cover a lot of ground in the rallies.
He took a 4-1 lead in the first set, then saved two break points at 4-2 as Nadal tried to force his way back into the match. The Spaniard kept making uncharacteristic errors, and lost the first set when he sent a backhand long.
Nadal saved a break point in the first game of the second set with a perfect half-volley drop shot after a long rally, but then netted another backhand to give Murray the game. The Briton never gave Nadal a chance after that, putting in the kind of performance that will raise expectations going into the French Open.
"I've pushed Rafa on the clay a few times," Murray said. "This (win) obviously gives me confidence."