Nalbandian's first ATP tournament win since 2002 came in just 69 minutes and earned him a new car from the sponsors as well as the 44,000 euros first prize.
"It wasn't easy," Nalbandian said after his breezy win on the Munich clay. "You have to work to play like this and I've been practising very hard.
"This was a very important win for me, my first after two strange years with so many injuries."
Nalbandian's perfect placement never gave the fifth-seeded Pavel a chance, as the Argentine won the first set with a single break before taking complete command in the second.
He consolidated an early break for 3-1, ran Pavel out wide to set up a break-point in the next and took it when the Romanian mishit an easy forehand into the bottom of the net.
Nalbandian set up three match-points with a stunning return that left his opponent flat-footed. Pavel clipped the line with a forehand to save the first but could not reach a vicious Nalbandian backhand on the next.
"David played unbelievably well," Pavel said. "It's a shame."