The Croat, who came into the match with a 6-2 head-to-head lead over the Austrian, was able to come through the showpiece match in 67 minutes with a composed display.
Cilic, who is currently ranked at number 12 in the world, also managed to lift the trophy in 2009 and 2010 and now has a 9-7 record in ATP World Tour finals.
"This final is probably the best match I played in this season," Cilic said.
"This was an almost brilliant match on my part. It was tough to break Melzer in the first set, but after I did it the path to victory was open."
Melzer, who recorded his 300th match win on Friday against Lukas Rosol in the quarter-finals, has now dropped to a 4-8 record in title matches.
"Cilic was much better today and deserved to win in front of his own crowd," Melzer said.