Nadal overcame three-time major victor Stan Wawrinka and Australian Open runner-up Marin Cilic en route to his 33rd Masters 1000 crown.
It will be the teenager's first career appearance in an ATP World Tour Masters 1000 final.
Nadal was steady and effective, using punishing groundstrokes to work Tsitsipas around the court.
As Tsitsipas spoke with the umpire, only to be told there was nothing he could do, Nadal shouted over and insisted the point was replayed.
Tsitsipas finally got a break to tie it at 5-5 and was a point away from forcing a third set before Nadal returned to form.
"I was sad not to play here last year, and two years ago there wasn't a chance".
"To receive this trophy means everything to me. It has been a fantastic week, a very positive one".
Khachanov, the world No. 38, hadn't lost a set this week entering his match against Nadal, who has won this tournament on three occasions.
Tsitsipas will jump from 27th to 15th in the world on Monday.
"He never cracks", said Tsitsipas of the ordeal of playing Rafael Nadal after the match.
The Spaniard has had some long nights due to the weather in Toronto which has seen him play late a couple of nights, including his semifinal match which was delayed due to rain but still finished on Saturday night, albeit past 11:00 PM local time. "So that's something else I'll need a bit more consistency on the tennis court". Big serve. Great shots from the baseline.
Though he wasn't left holding the winner's trophy, Tsitsipas almost pushed Nadal to a third set.
He then withdrew from next week's ATP Cincinnati Masters event as he prepares for this month's US Open, saying he had chose to adjust his schedule in order to preserve his fitness.
It was a servers' dual under the lights in Cincinnati, up until the ninth and 10th games of the opening set.
Nadal's punishing pace and consistency set him up to serve for the match, but he tightened up and it proved costly.
The former world number one looked rusty in the opening exchanges, with two double faults in his first service game setting the tone for a poor opening set.
The second set saw the same elusive play from Nadal as a set prior.
"Hopefully I'll make improvements each day and get to the level I want to be at later this week". After that I accepted the situation, just fought back and tried to stay positive.
Victory in Toronto brought Rafael Nadal 1000 points and more than $ 1 million in prize money. "He would have added massively to that part of the draw".
Nadal had signalled he was planning on withdrawing following his 6-2, 7-6 (4) win over over Stefanos Tsitsipas earlier on Sunday.