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The south Asian nation claimed their third ICC tournament, having earlier won the 50-over World Cup in 1992 and the World Twenty20 in 2009.
Put in to bat, Pakistan rode on a century by opener Fakhar Zaman to post a massive total of 338/4 in the allotted 50 overs.
In reply, India were all out for 158 runs in 30.3 overs.
For Pakistan, pacers Mohammad Amir and Hasan Ali bagged three wickets each.
This was the biggest margin of victory in any ICC ODI tournament in terms of runs. The previous highest was registered by Australia when they thrashed India by 125 runs in the 2003 World Cup final in Johannesburg.
Pakistan pacer Hasan Ali finished as the highest wicket-taker of the tournament with 13 scalps. The right-armer was also adjudged as the player of the tournament. Ali is also the first bowler to take four successive three-wicket hauls in the Champions Trophy.
All-rounder Hardik Pandya was the highest scorer among the Indians with 76 runs from 43 balls.
He scripted the fastest half-century in a world One-Day International (ODI) final, reaching the landmark in 32 deliveries with three consecutive sixes off leg-spinner Shadab Khan.
But the rest of the much acclaimed Indian batting line-up staged a spectacular collapse and were reduced to 72/6 in the 17th over.
The Indian innings was off to a disastrous start with Pakistan fast bowler Mohammad Amir producing a fiery opening spell.
The left-arm pacer extracted movement both in the air and off the pitch and quite a few of his deliveries were almost unplayable.
Amir trapped Rohit Sharma leg before off the third ball in the opening over without even a single run on the board.
He struck a crucial blow in his very next over when he dismissed India captain Virat Kohli.
Kohli, who was dropped at first slip by Azhar Ali in the previous ball, tried a flick to the on-side but could only manage a leading edge straight to Shadab Khan at point.
The in-form Shikhar Dhawan, who finished as the tournament's highest scorer with 338 runs, seemed set for another fine knock as he hit four boundaries during his 22-ball 21.
The left-hander fell to another superb delivery by Amir which kissed the outside edge on its way to Sarfraz Ahmed behind the stumps.
Yuvraj Singh, Mahendra Singh Dhoni and Kedar Jadhav followed each other back to the pavilion in quick succession as Pakistan tightened their grip on the proceedings.
Pandya and Ravindra Jadeja tried to stage a comeback with an 80-run stand, but it was never going to be enough.
By the time Pandya was run out in the 27th over following a horrible mix-up, the match was as good as done and dusted.
Apart from Zaman (114), Azhar Ali (59), Mohammad Hafeez (57 not out) and Babar Azam (46) also contributed handsomely to Pakistan's cause.
Pakistan, who lost their campaign opener against India, seemed a different side this time. Pakistani batsmen played intelligently and showed their character for the big match. They played the ball according to its merit and made full use of the conditions despite losing the toss.
India, on the other hand, who played to their potential throughout the tournament, were struggling against the disciplined Pakistani batting lineup and failed to utilise the conditions completely.
Fielders made several mess-ups in the outfield while bowlers failed to bowl at the right line throughout the innings as a result arch-rivals Pakistan managed to score a healthy total.
Put in to bat, Pakistan got off to a perfect start. Openers Azhar and Zaman put up a solid platform for other batsmen to post a good total on the board. The duo forged 128-run partnership in 23 overs before a running mix-up cost Pakistan a wicket.
After playing a shot to left of the square leg, Azhar wanted to steal a single but Zaman didn't respond his call and thus India got a much needed breakthrough in form of Azhar. The 32-year-old batsman slammed four boundaries and one six in his 71-ball knock.
Unperturbed by the fall of Azhar's wicket, Zaman, who was given a lifeline at three runs by pacer Jasprit Bumrah, continued his attack and displayed some quality strokes around the ground to enthrall the crowd. Soon, Zaman completed his century in 92 balls through a sweep at the square leg.
Incoming batsman Babar Azam kept on supporting the 27-year-old in-form batsman by giving him the strike. After completing his century and adding 72 runs for the second wicket with Azam, Zaman tried to up the ante. But while trying to slog the medium pacer Hardik Pandy's delivery, Zaman was caught by Ravindra Jadeja, who ran from the point to take a brilliant catch at the square on the off-side in the 34th over. In his 106-ball innings, Zaman hit 12 boundaries and three sixes.
With 16 overs remaining and two set batsmen back to pavilion, Azam and Shoaib Malik (12) played sensibly and punished the bad balls. Azam, who was previously supporting Zaman, now took the charge and played freely. But just when it seemed good for the Pakistan team, Malik played a loose short off pacer Bhuvneshwar Kumar and gifted his wicket. Kedar Jadhav took a simple catch at the deep cover to dismiss the 35-year-old batsmen in the 40th over.
Middle-order batsman Mohammad Hafeez then joined Azam but this time the Pakistani duo failed to click as India skipper Virat Kohli's ploy to bring back spinner Jadhav clicked. After adding 20 runs for the fourth wicket with Hafeez, Azam was caught by Yuvraj Singh at the boundary in the 43th over. His 52-ball knock comprised of four boundaries.
The last few overs saw Hafeez thrashing Indian bowlers all around the park. In the process, Pakistan crossed the 300 run mark with Hafeez slamming a huge six over deep square leg in the 46th over off pacer Kumar. Soon, Imad Wasim (25) also joined Hafeez and attacked Indian bowlers to post a healthy total.
For India, pacers Bhuvneshwar Kumar, Hardik Pandya and spinner Kedar Jadhav took one wicket each.
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