The Spaniard appeared to be on his way to victory when he took the first set 6-3 in Tokyo.
However, Murray responded positively to take the next two sets 6-2 6-0 to wrap up the title.
After the match, Nadal said that Murray deserved his victory.
"Andy played unbelievable. He deserves the title," said the 25-year-old.
"I've lost a few sets 6-0 of course. You prefer it doesn't happen, but he played fantastic and in the third set he started to play at a really high level. Accept. That's it."
Nadal had entered the competition as reigning champion.