The Serbian world number two took advantage of an under-par Nadal to come out 6-3 6-4 at the O2 Arena in London.
The victory saw Djokovic pick up his seventh title overall in 2013.
Read Sports Mole's minute-by-minute report below to find out how the action unfolded.
7.46pmGood evening and welcome to Sports Mole's live text coverage of tonight's ATP World Tour final between Novak Djokovic and Rafael Nadal at the O2 Arena in London. Strap yourselves in...
7.50pmSo, as the ATP have repeated time and again over the past week, this is where it all ends. These two players have won all of their matches so far at the season-ending tournament but there can be only one winner tonight.
7.53pmIt's usually something special when these two face each other, and this match promises to be no different. It's not your usual best-of-five-sets encounter that we've seen them slug it out in down the years, but it still has all the potential to be a classic contest.
7.57pmIncredibly, this will be the 19th final that Nadal and Djokovic have played each other in. The Spanish world number one has come out on top nine times, while the Serbian world number two has won the other nine meetings.
8pmUPDATE: The doubles final has just finished with Fernando Verdasco and David Marrero beating the Bryan brothers 10-7 in a champions tie-break. Congratulations to the Spanish duo!
8.04pmAnyway, back to business. Despite it being equal between Nadal and Djokovic in finals, the Spaniard has the upper hand overall. He currently leads his rival 22-16 in all competitions and has come out on top in six of the last eight matches.
8.06pmHowever, let's not forget that Djokovic is the reigning champion here and will be doing everything that he can to keep his hands on the trophy.
8.12pmBefore this match gets underway, it must be said just what an incredible season Nadal has had up to this point. Not only was he able to come back from a debilitating knee injury but he went on to win 10 titles, losing just six matches along the way. Two of those titles were Grand Slams (French Open, US Open) and it was all topped off last week when he made sure that he would end the year as the world number one.
8.17pmSo, how did these two players get here? Nadal saw off David Ferrer, Tomas Berdych and Stanislas Wawrinka in Group A of the competition before defeating his old foe Roger Federer in the semi-finals. For Djokovic, he beat Federer, Juan-Martin del Potro and Richard Gasquet in Group B before knocking out Wawrinka in the last four.
8.20pmNot long now until the players emerge on court...
8.23pmThe players are out and going through their pre-match knock-up. Both men have looks of intense focus on their respective faces as this crowd bristles with anticipation.
8.30pmHere we go then! Djokovic to serve first in this ATP World Tour final. You can cut the tension with a knife already.
8.38pmNADAL 0-1* DJOKOVIC We've already had a couple of brutal rallies, but Djokovic comes through with a comfortable hold in the end. Both men look to have found their rhythm already.
8.43pmBREAK! NADAL 0-2* DJOKOVIC First blood to Djokovic as he gets an early service break! The Serb moved into a 0-40 lead before Nadal saved one break point with a deliciously deft backhand at the net. However, the Spaniard then hit the ball into the net on the next point.
8.47pmNADAL *0-3 DJOKOVIC Nadal is struggling with his forehand at the moment as Djokovic consolidates the break with a hold. The Spaniard got himself back to 40-30 there in what was a bitty game, but he forced the ball into the net again to help Djokovic close it out. The world number one is finding it difficult to get the right length on his shots.
8.55pmNADAL 1-3* DJOKOVIC Nadal finally gets on the board but not after Djokovic squanders a break point. A couple of double-faults from the Spaniard presented Djokovic with a glorious opportunity, only for the world number two to hit a backhand well wide. Nadal then recovered to finally get himself a hold. Some wayward hitting from both men during that game.
9.01pmBREAK! NADAL *2-3 DJOKOVIC Djokovic only has himself to blame there as Nadal breaks back. The Serb dug himself out of a hole at 15-40 by saving two break points, but Nadal earned himself another before Djokovic whacked a wild forehand out of play. Both players continue to show some erratic tendencies.
9.06pmNADAL 3-3* DJOKOVIC Nadal levels the match with a fairly simple hold of serve. Looking back, how important will that miss from Djokovic be to get a double break earlier in the match? It's clearly rattled him.
9.09pmNADAL *3-4 DJOKOVIC Another simple hold, this time for Djokovic. The world number two looked a bit more like his rock-steady self there. Meanwhile, Nadal has a lot more vim and vigour about him now after a slow start to the contest.
9.15pmNADAL 3-5* DJOKOVIC Wonderful from Djokovic to break again! Some excellent returning from the Serb brought up a break point and he converted at the first time of asking after an incredible joust between both men and the net. Swashbuckling tennis.
9.20pmSET! NADAL 3-6 DJOKOVIC Djokovic does just about enough to close out the set, but not after some aggressive tennis from Nadal. These two really turned on the style in the last two games. It's been scrappy at times, though they are now doing what they do best: slugging it out.
9.23pmRight then, the players have had a quick breather and it will be Nadal to open the serving in this second set. Can the world number one respond?
9.27pmNADAL 3-6 1-0* DJOKOVIC Nadal had to dig himself out of trouble there after going 0-30 down, but he was able to fight back and seal the hold. It's all very tense indeed inside the 02 Arena.
9.31pmNADAL 3-6 *1-1 DJOKOVIC A couple of dodgy shots from Nadal allow Djokovic to hold serve and level the second set. While the end of the first set fizzled, it's all a little bit more subdued at the moment. When these two play, every moment is critical.
9.35pmBREAK! NADAL 3-6 1-2* DJOKOVIC How important could that break be for Djokovic? The Serb brought up three break points thanks in no part to some woeful hitting from Nadal before the Spaniard hit a forehand long to give his opponent the advantage. Djokovic lets out a roar as he edges closer to the title.
9.39pmNADAL 3-6 *1-3 DJOKOVIC Emphatic from Djokovic as he holds to love. However, Nadal continues to look a shadow of what we know he can be. He's playing well below par at the moment.
9.42pmNADAL 3-6 2-3* DJOKOVIC Nadal keeps himself in the match with a relatively simple hold. That said, it looks as if he will need to produce something special if he is to topple Djokovic tonight. Still, there's plenty of time for the world number one to turn this around and we should know better than to write him off at this stage.
9.48pmNADAL 3-6 *2-4 DJOKOVIC Djokovic moves 40-0 ahead before Nadal claws it back to 40-30, but the Serb closes out the game with a savage smash.
9.55pmNADAL 3-6 3-4* DJOKOVIC How important could that hold be for Nadal? The Spaniard saved two break points before eventually working Djokovic down. That would have been all but game over there if the Serb broke. It's by no means a classic, but this match has still provided plenty of entertainment.
10pmNADAL 3-6 *3-5 DJOKOVIC Djokovic moves to within one game of the title thanks to some solid, consistent hitting from the back of the court. He looks like a man on a mission right now as he puts one hand on the trophy.
10.04pmNADAL 3-6 4-5* DJOKOVIC Nadal got out of jail there as Djokovic failed to capitalise on a Championship point. However, he's somehow still in the match as the serve prepares to serve for the title. Can he do it?
10.11pmGAME, SET AND MATCH! NADAL 3-6 4-6 DJOKOVIC
10.12pmNadal hits wide and Novak Djokovic wins the ATP World Tour final 6-3 6-4! It took him a couple of bites of the cherry, but he got there in the end in what was a tense final game.
10.14pmIt was far from a classic, but there can be no denying that Djokovic deserved to win that match. The world number two was that bit more consistent than Nadal and he got his just rewards.
10.15pmAnyway, that's all from me for now. However, stay tuned right here on Sports Mole for all of the reaction from both players. Thank you very much for your company, we hope that you've enjoyed our live text coverage. Thanks again and enjoy the rest of your night!