Kauto Star, who two years ago closed out his own fifth of what are now eight Nicholls victories, led the field onto the course before 100-30 favourite Cue Card assumed responsibility for the vast majority of the three miles.
Jumping bravely and moving swiftly with his head held characteristically high, Cue Card appeared to have the Grade One in hand across nearly every blade of grass until just before the last fence, where he was overcome by his exertions on what was very testing ground and quickly passed and beaten 3½ lengths by Noel Fehily and Silviniaco Conti.
Colin Tizzard's Cue Card had finished almost six lengths ahead of Silviniaco Conti (7-2) when the pair met in last month's Betfair Chase at Haydock and their rivalry may very well be stretched to a third round in the Betfred Cheltenham Gold Cup. Fehily was constantly guarding against allowing Cue Card and Joe Tizzard the chance to stride on clear, and while he looked to be struggling to match him turning for the finish, the chestnut continued to respond to him.
Silviniaco Conti looked to have the world at his feet when marching away from dual King George winner Long Run (who parted company with Sam Waley-Cohen at the last when well-beaten here) in the previous renewal of the Betfair Chase but had taken a heavy fall three from home in the Gold Cup.
"I knew what Joe was going to do, we didn't want to give him a soft lead. Cue Card was jumping better than us, but our horse stays forever," said Nicholls. "Kempton is not an ideal track for him, he jumps a bit out to the left, but all the rain really changed it. I think if it had been quick ground today, we'd have been in trouble. We'll aim him for the Gold Cup, and decide if he has a run before. I know people have said otherwise, but I thought he was cantering when he fell last season.
Fehily, regular rider for Silviniaco Conti's owners Chris Giles and Jared Sullivan, said: "I was going to ride Kauto Star the year he got beat but I was injured and you wonder if you're ever going to get another chance to win a King George. I grew up watching Desert Orchid in this race, so to actually go and win it is unbelievable.
Tizzard would not be rushed into a rematch, but said: "I'm delighted for the horse; you saw the real Cue Card today and he just got outstayed. Joe gave him a great tactical ride, the other horse has beaten us, and that's fine. It might be different on better ground. We've got another week to think about that Gold Cup [entries are revealed on January 8].
The winner's stablemate Al Ferof was 11 lengths back in third in a race dominated by just two horses, and Nicholls said: "I was worried about soft ground for him. He might be more a Ryanair horse than a Gold Cup horse this year, but I'll talk to John Hales [owner]."
Only two more of the nine starters, Mount Benbulben and Dynaste, finished.