In a surprise final match-up, the Bulgarian sixth seed held his nerve under intense pressure at London's O2 Arena to seal the biggest title of his career on his fifth match point.
He will climb to third in the rankings behind only Rafael Nadal and Roger Federer as he begins to deliver decisively on his rich promise as a youngster.
"It has been a tremendous two weeks for me," said the 26 -year-old. "It is such an honour to play here. This week has been one of the best I have had."
The Bulgarian came into the title decider unbeaten at the O2, with a healthy 4-1 head-to-head record against Goffin, including a 6-0, 6-2 win in the round-robin stage.
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But seventh seed Goffin was buoyed by wins over world number one Nadal and and a gutsy effort against second seed Federer, coming back from a set down to beat the Swiss in the semi-finals.
Both players struggled to hold serve at the start of the contest in front of a feisty packed house and the error count was high from both men.
The errors continued to flow from a nervy-looking Goffin and Dimitrov finally secured the decisive break on his fifth set point when the Belgian thumped a forehand into the net.
Goffin, 26, landed just 42 percent of first serves in the first set and made 20 unforced errors, struggling to find the bite and consistency he had enjoyed in beating Federer.
Infused with renewed belief, the Belgian held his nerve to clinch the set 6-4.
Despite a sprinkling of break points, a tight third set went with serve until the sixth game, when Dimitrov broke to lead 4-2 as Goffin went wide with a backhand.
As the tension mounted, Goffin bravely saved three championship points on his own serve but Dimitrov held his nerve to seal the match on his own serve after two-and-a-half hours, at the fifth time of asking.
"We did an amazing job. It was tough after losing to Grigor in the group. It was not easy to come back but we worked a lot as a team."
- Masters win -
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Dimitrov has enjoyed the best season of his career, claiming his first Masters title in Cincinnati and winning two other titles aside from the ATP Finals as well as reaching the Australian Open semi-finals.
The final that nobody expected came just a year after Novak Djokovic and Andy Murray battled it out in London for the number one slot.
But both players have been absent from the Tour for months and with Nadal also forced to pull out of the ATP Finals after his round-robin opener, the end-of-season finale has had an unusual flavour.
Sunday's final was the first time in the tournament's history that two players who qualified for the first time faced off in the title decider.