Resuming the day at 164/3, the Services team lost the last seven wickets only for 76 runs in comparison to Mumbai's 454/8 declared.
Skipper Soumya Swain (74) and Yashpal Singh (58) could only manage to add 22 more runs Monday before their 114-run fourth-wicket partnership was broken by medium pacer Shardul Thakur, who ended up with figures of 3/68.
Thereafter, none of the batsmen could forge a partnership with the highest partnership being of 24 runs put up by Sarabjit Singh (11) and Avishek Sinha (22) for the seventh wicket, which lasted for more than an hour.
Pacer Dhawal Kulkarni rocked the Services' lower order to end with his 10th five-wicket haul of his First Class career (5/33).
Mumbai skipper Ajit Agarkar was declared the Man of the Match for his match-winning 145.
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The last time Mumbai lost a Ranji Trophy final was when Haryana beat them in 1990-91.
Mumbai will take on Saurashtra at home at the Wankhede Stadium Jan 26-30 for their 40th title. K. Hariharan and O. Nandan will be the field umpires and Virender Sharma will be the third umpire. Chinmaya Sharma will be the match referee. The match will be telecast live.
Earlier, Saurashtra qualified for the final by virtue of their 229-run win over Punjab in the semi-final played at Rajkot. It will be Saurashtra's first appearance in a Ranji Trophy final.
Brief scores: Mumbai 454/8 decl. (Agarkar 145, Tare 120, Nayar 70) drew with Services 240 (Swain 74, Yashpal 58; Kulkarni 5/33, Thakur 3/68).