Tatiana Volosozhar and Maxim Trankov also signalled they will be gold medal contenders at the Black Sea resort by taking the pairs title and putting Russia back on top of an event they once dominated.
Although Chan's sloppy free skate to Puccini's "La Boheme" did not come close to capturing the magic or record marks he received for Wednesday's short program, he did just enough scoring 267.78 to become first skater since Russia's Alexei Yagudin (1998-2000) to claim three consecutive world titles.
It marked the fourth time in six years a Canadian man has stood atop the world podium and brings Chan's championship haul to five medals with two silvers to go along with three gold.
Chan entered the free skate with a whopping seven point lead and needed all of the advantage to ensure victory.
Tapping into the energy of the biggest crowd of the championship, the 22-year-old Canadian started impressively, landing two dazzling quadruple jumps.
But his program began to unravel in equally spectacular fashion with Chan landing on his backside twice and botching his three-jump combination.
When the music stopped, a rattled Chan could not hide his disgust, hanging his head before eventually managing the smallest of smiles.
"I am angry at myself, I am mad because I didn't skate well for this audience," an apologetic Chan said. "I am sorry I didn't skate better for them.
"It is a two program competition and I am thankful for a beautiful short program.
"Maybe I'm saving it up for Sochi.
"I feel good, will enjoy this day, week. It's where I want to be heading into Sochi."
On an error strewn night that will never go down as an advertisement for men's skating, it was left to Kazakhstan's Denis Ten to provide the evening's shining moment. easily winning the free skate to take silver with a mark of 266.48.
Ten's achievement made him the first skater from his country to medal at the world championships.
European champion Javier Fernandez of Spain, seventh after the short program, delivered the comeback of the competition jumping up to take the bronze with 249.06.
After a trying season packed with uninspiring performances, Chan arrived in London declaring himself the underdog but will not be able to assume that role in the build-up to Sochi.
A less than stellar performance in Friday's free skate left no doubt there is plenty of work to be done before next February but Chan will at least start out as the gold medal favourite.
"I can take a lot out of these world championships, I'm going to take a win, put it in my back pocket and learn from it for next season," Chan said.
For Volosozhar and Trankov, the timing of their triumph could not have been better as they look ahead to competing on home ice next year.
In sharp contrast to chaotic scenes in the men's event, Volosozhar and Trankov produced and elegant and daring free skate that earned them a runaway 20-point victory with a world record total of 225.71.
The Russians ended the two-year world championship reign of Germany's Aliona Savchenko and Robin Szolkowy, who settled for silver, while Canada's Meagan Duhamel and Eric Radford took the bronze.
"It means we can fight for the gold in Sochi and give back to Russia Olympic gold," said Trankov, when asked what the win meant. "For sure it is very important to win the year before the Olympic Games and we are absolutely happy to get this gold."
Russians won 12 consecutive pairs Olympic golds from 1964 through 2006 but were shut out of the medals completely at the 2010 Vancouver Games.
They also dominated the world championships from 1965 to 1990, only failing to win gold three times but have not seen a Russian pair on top the podium since Tatiana Totmianina and Maxim Marinin in 2005.