The world number two, who requires victory in this end-of-season tournament to reclaim top spot in the men's rankings, showed signs of his best form in the final two sets.
Djokovic was edged out 12-10 in a thrilling tie-break in the first round, coming after both players held serve throughout the first 12 games of the match, as Thiem kept his cool to move into the lead.
Five-time winner Djokovic had to receive treatment to a thumb injury early on, and his troubles seemed to get to him as he was also warned for unsportsmanlike conduct after failing with his one and only set point.
Thiem struggled to build on that first-set triumph, though, losing 12 of the last 14 games to see his hopes of a surprise Group B win come to a disappointing end.
Djokovic took the second set in a time of just over 20 minutes, storming to a 6-0 triumph after breaking each of his opponent's serves, before taking the decider in an equally-emphatic manner by once again holding to get over the line easily enough in the end.
The Serbian pro needs to win one more of his group-stage games at the O2 Arena and also lift the trophy if he is to oust Andy Murray as the world's number one, having seen his long-running reign as the game's top player come to an end last weekend. body check tags ::