Federer entered the final searching for his seventh success in the event, but it was the world number one who added a fifth Tour Finals title to his collection to become the first player to win the season finale four years in a row.
Each player was forced to save break point in their opening service game, and a gripping start continued when Djokovic, who had lost to the 34-year-old in the round robin stage, made the breakthrough in the third game of the match.
The Serbian quickly found his rhythm on serve to limit the opportunities on offer as a predictably tireless display saw him win crucial rallies in the opening set.
Another break arrived as Djokovic clinched the first set, but Federer responded well in an enthralling second.
As the crowd hoped for a Federer fightback, the third seed seemed to be causing more problems for his rival with some fine shot-making from all over the court.
Djokovic appeared to waste a big chance to clinch the win when Federer fought back from 0-40 to hold his serve in the eighth game, but the defiant response simply delayed the inevitable.
Federer's next service game invited even more pressure from Djokovic, who converted match point at the second attempt to ensure it was the perfect end to another dominant year. body check tags ::