Djokovic has won 26 consecutive matches since December, and his record of 24-0 in 2011 is the best to begin a year since Ivan Lendl started 25-0 in 1986.
The second-ranked Djokovic was pushed the distance by Nadal on a sunny, hot afternoon. They played for nearly three hours, and it was Djokovic who looked fresher at the finish.
He pulled a forehand winner cross-court on the final point for his second Key Biscayne title, having also won in 2007.
Djokovic beat Nadal in the final at Indian Wells two weeks ago and is 8-0 against top-10 opponents this year.
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He's the first man to win Indian Wells and Key Biscayne back to back since Roger Federer in 2006.
As the victories mount, his popularity rises. Djokovic seemed to have at least half the record capacity crowd of 14,625 in his corner.
Fans frequently chanted "No-le! No-le!" - his nickname.
In response came chants of "Ra-fa! Ra-fa!"
Djokovic fell behind early, losing his serve for the first time in the tournament, then gradually climbed back.
Both players held throughout the final set, and it finally swung Djokovic's way when Nadal double-faulted for the sixth time to fall behind 3-2 in the tiebreaker.
Djokovic won the next three points as well, and the exchanges left a weary Nadal bending over as he tried to recover.
When Djokovic closed the victory, he jumped with delight and signaled to encourage more cheers from the roaring crowd.
It's a familiar routine for the Serb: His other titles this year came at the Australian Open and Dubai.
The two finalists will keep the same rankings, even though Nadal hasn't won a tournament since Tokyo in October.
He was trying for his first Key Biscayne title after having been runner-up in 2005 and 2008.
