Kittel - who won four stages at last year's Tour de France - took a routine victory ahead of Frenchman Nacer Bouhanni (FDJ.fr) and Italian Giacomo Nizzolo (Trek Factory Racing) after another wet day in the saddle in Northern Ireland.
By virtue of finishing ahead of Canadian team-mate Svein Tuft - the overnight leader of the race following Friday's team time trial - Matthews is the new maglia rosa despite only finishing in eighth, one place behind Britain's Ben Swift (Team Sky).
A largely sodden 219km stage spirited the riders to the famous whisky distillery at Bushmills on the north coast before a coastal ride back to Belfast via the Giant Causeway.
Dutchman Maarten Tjallingii (Belkin) was the last rider of a four-man break to be reeled in just over three kilometres from the finish. Tjallingii had crossed the summit of both Cat.4 climbs on the agenda to secure the race's first blue mountains jersey.
It was the Orica-GreenEdge team who led the peloton through a tight left-hand bend inside the final kilometre - but their man Matthews did not have enough in the tank to contest the final sprint to the best of his ability.
Kittel easily outpaced Bouhanni and Nizzolo for the win, with Italians Elia Viviani (Cannondale), Roberto Ferrari (Lampre-Merida) and Manuel Belletti (Androni) crossing the line soon after. Italy's Davide Appollonio (Ag2R-La Mondiale) and American Tyler Farrar (Garmin-Sharp) completed the top ten.
Matthews now leads the GC by three seconds over five GreenEdge team-mates after a split formed in the peloton inside the final kilometre. Runner-up last year, Colombian Rigoberto Uran (Omega Pharma-Quick Step) is seventh at eight seconds.
FOUR-MAN BREAK: Dutchman Maarten Tjallingii (Belkin), Belgian Sander Armee (Lotto Belisol), Italian Andrea Fedi (Neri Sottoli) and Colombian Jeffry Romero (Colombia) broke clear soon after the start. They built up a maximum lead of six-and-a-half-minutes as the rain poured down before being reeled in on the outskirts of Belfast.
BIG WINNER OF THE DAY: 25-year-old Kittel became the sixth German to win a stage in all three Grand Tours after Andre Greipel, Jan Ullrich, Marcel Wust, Rolf Aldig and Dietrich Thurau.
BIG LOSERS OF THE DAY: Spaniard Koldo Fernandez joined Garmin-Sharp team-mate Dan Martin on the sidelines after not taking to the start following their dramatic crash in the opening TTT. Italy's Giampaolo Caruso (Katusha) also suffered a nasty fall in the treacherous conditions.
KEY MOMENT: As soon as Marcel Kittel opened up the sprint inside the final 300m there was only going to be one winner.
TALKING POINT: How long will Kittel remain in the race? With the last week of the Giro taking place in the Alps, will the German youngster throw in the towel early - or will he, like Mark Cavendish last year, be tempted by the prospect of winning the red points jersey?
COMING UP: Sunday's 187km stage takes the riders across the border and into the Republic of Ireland for what looks likely to be another bunch finish in Dublin.
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