McDowell overturned an eight-shot deficit thanks to a brilliant closing 67 despite the wet and windy conditions at Le Golf National, although he also had plenty of help from American Kevin Stadler. Scotland's Stephen Gallacher, meanwhile, failed to arrest his slump after an opening 66 as a 75 - his worst round of the week - left him nine shots behind.
Stadler's four-shot overnight lead disappeared with a front nine of 41, but he battled back well with birdies on the 14th and 16th to pull within one of McDowell, who had moved three ahead with his fifth birdie of the day on the 16th.
With McDowell then dropping his only shot of the day on the 18th after finding heavy rough off the tee, Stadler needed to par the last to force a play-off but missed from two feet just as McDowell left the recording area to prepare for extra holes.
Stadler's closing 76 left him in a tie for second with Thailand's Thongchai Jaidee, who dropped five shots in the first four holes but played the remainder in four under for a 72.
"I'm very surprised," McDowell said after claiming his 10th European Tour title. "Midway through my second glass of red wine last night, when I was very disappointed with my back-nine performance on Saturday, I really didn't think I'd be a) standing here with an opportunity to be in a play-off and b) with a trophy in my hands.
"I feel very fortunate. Kevin Stadler is a great, great player. I literally gave him that putt on the last green. I didn't expect him to miss that. It's not really the way you like to win. I was ready to go for the play-off, but I'll take it and run. I really needed this victory. It's a special one for me. It's pretty timely. There's a busy summer ahead and this a really good kick-start to the summer."
McDowell has deliberately played a lighter schedule this year - even missing the BMW PGA Championship at Wentworth - to leave himself fresher for the second half of the season. "It's a good decision now, but I have to say myself and my team were starting to question it," the former US Open champion added. "But my body has probably never been in as good a shape at this point in the season coming into two major championships, the FedEx Cup play-offs and hopefully the Ryder Cup."
McDowell, who held the outright lead after the first round of the Open the last time it was held at Hoylake in 2006, added: "I was at Hoylake a couple of weeks ago. I think it's my type of set-up.
"You really have to find fairways off the tee and there are big flat greens where you can hole some putts. This is a nice confidence booster and I will be back at Hoylake next Sunday ready to go."
Stadler found himself five clear of the field when playing partner Jaidee got off to a terrible start and local favourite Victor Riu followed a birdie on the first with a double bogey on the second.
But the 34-year-old then missed from 18 inches for par on the fourth and four feet on the sixth, before running up a double-bogey six on the next where his ball was only found in the deep rough because an on-course television commentator stood on it.
Stadler was allowed a free drop but could only hack the ball a few yards sideways and eventually did well to get up and down from short of the green for a six. A poor chip from left of the eighth green led to another bogey and two more early in the back nine looked to have ended his chances as McDowell picked up shots on the 13th, 14th and 16th.
Three spots at Hoylake were up for grabs for players, not already exempt, who finished in the top 10. Karlsson and Hoey finished fourth and seventh respectively, while Riu claimed the final berth and Open debut by a single shot despite a double bogey on the 18th in a round of 76.
On the women's European Tour, Vikki Laing closed with a round of 68 to finish tied for sixth and eight shots behind the winner of the Ladies European Masters, In-Kyung Kim. The South Korean finished five shots clear of the field on 18 under par. Sally Watson finished in a tie for 18th on six under par, while Pamela Pretswell was a further seven shots back on one over par.