Ronaldo's deflected free kick put Real in charge in the 23rd minute in the first meeting of the teams since the Champions League final in May.
The prolific Portuguese killed off Atletico's resistance by winning and converting a penalty in the 71st minute and capped a harrowing night for the home side by tapping in the third in the 77th.
It was Real's first league win over their city rivals since 2013 while Ronaldo's treble took him to the top of the league's scoring list on eight goals along with Barcelona pair Lionel Messi and Luis Suarez.
Real are top of the table with 30 points from 12 matches, four above Barcelona after the champions were held to a goalless draw at home to Malaga who finished the game with nine men.
Atletico are nine points adrift of Real in fifth while Sevilla are third on 24 after beating Deportivo La Coruna 3-2.
The Madrid derby took on extra significance for being the last league meeting of the sides at the Vicente Calderon with Atletico due to move from the 50-year-old ground to a new 67,000 capacity arena next year.
"It's a very important victory for us at a difficult ground. We played very well from the start and there's not many teams that can do that at this ground," said Real coach Zinedine Zidane.
"I'm delighted with Cristiano's goals and (midfielder) Isco was incredible, he didn't give the ball away once."
Real were without midfield duo Casemiro and Toni Kroos and Zidane decided to rest Sergio Ramos and Karim Benzema, who had only just recovered from injury.
After a frantic end-to-end start, the visitors took control and came close to taking the lead when Ronaldo headed towards goal and Jan Oblak dived low to hook the ball off the line.
Real's all-time top scorer told the referee's assistant the ball had gone over the line but he did not have to wait much longer to celebrate a legitimate goal.
SAVIC DEFLECTION
He whipped a free kick at the wall and saw it deflected off Stefan Savic's hip beyond Oblak.
Just like the Champions League final, Atletico made a better start to the second half and set about trying to get a foothold in the game.
Antoine Griezmann burst into the box from the left but could only fire the ball out for a throw from a tight angle while Yannick Carrasco came close with a long-range strike.
Atletico coach Diego Simeone threw caution to the wind by bringing on forwards Kevin Gameiro and Angel Correa for Fernando Torres and Gabi but Ronaldo took advantage of the extra space at the back, racing behind Savic and tumbling over the defender's stray leg.
Ronaldo sealed Real's 11th European Cup triumph with a penalty against Oblak and made no mistake from the spot here, sending the Slovenian the wrong way.
He then stuck the knife into Atletico by turning in Gareth Bale's low cross to complete his treble.
Atletico midfielder Koke felt the scoreline was harsh on his side.
"It's been a difficult night. We leave here very sad, I don't think we deserved to lose 3-0," he said.
(Editing by Ed Osmond and Tony Jimenez)
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