Performing her jump-packed free skate to "Don Quixote", Zagitova, who is competing in her first senior season, executed a near-flawless programme to finish first with 238.24 points, a result that makes her a contender for gold at next month's Olympics.
"I am very happy to have skated two clean programmes," the soft-spoken Zagitova told a news conference.
"I'm really happy that I've won the European championships, but I have to keep going."
Medvedeva, 18, skated strongly but had a few difficult landings and won silver, trailing her training partner Zagitova by just over five points in the overall standings.
Medvedeva, a twice world champion who had been unbeaten since November 2015, had returned to competition on Thursday after recovering from a fractured foot.
Her comeback was spoiled, however, as Zagitova outscored her by 1.7 points in the short programme.
Last month, Zagitova won the Grand Prix Final while Medvedeva was nursing her injury.
"Silver is silver. You can't change the value of a medal," Medvedeva said after her skate. "But after a two-month absence, I think it's not that bad."
Italy's Carolina Kostner, who won bronze at the 2014 Sochi Games, fell on her opening jump of her free skate, a triple Lutz, before doubling her triple toeloop.
The uncharacteristic mistakes cost her dearly as she finished third with a combined total of 204.25 points.
WORLD RECORDS
France's Gabriella Papadakis and Guillaume Cizeron set world records as they won their fourth consecutive European ice dance title earlier on Saturday with an inspired performance that laid down a marker for a podium place for the Pyeongchang Olympics next month.
Dancing to Beethoven's "Moonlight Sonata", the twice world champions effortlessly swayed on the ice, executing the complex elements integrated in their choreography.
With 121.87 points in the free dance, a world record, they amassed a combined total of 203.16 points -- one point above the world record they set at the Grand Prix Final last month.
"We are very satisfied with what we did," Papadakis told reporters.
"It wasn't an easy competition because it falls in the middle of our Olympic preparations. We wanted to prove to ourselves we were ready and see what we had to improve for the Games. We achieved that."
After finishing fourth in the short dance, Ekaterina Bobrova and Dmitri Soloviev of Russia won silver with 187.13 points, while their compatriots Alexandra Stepanova and Ivan Bukin took the bronze with 184.86 points.
"Not everything was ideal in our free skate," said Soloviev, who won bronze at last year's European championships.
"We made errors on our lifts. But overall we are pleased with our performance. We know what we have to work on."
(Reporting by Gabrielle Tétrault-Farber; Editing by Ken Ferris and Toby Davis)
