The 24-year-old edged a nail-biting deciding leg against Wright, who is still in search of his first title of the year.
Payne recorded wins over Steve West, Zoran Lerchbacher, Christian Kist, Mervyn King, Jonny Clayton, Ian White and Wright en route to clinching the £10,000 top prize.
A winner of a Players Championship event in 2016, Payne had only reached one semi-final on the ProTour in 2018 before going all the way in Sunday’s event.
“I’m delighted that my hard work is paying off,” said Payne, who has two Unicorn Development Tour titles to his name. "Peter is a good friend of mine but I had to put that aside for the final.
"I played some really good darts all day which was very pleasing for me. I had a tough year last year, and since then I’ve really put the work in and dug deep so to see it paying off makes me really happy.
"I hit some big scores and took out some big finishes all day and I had to hold it together in that final leg.”
Wright broke the Payne throw in the opening leg, before the Englishman broke back straight away, and then won the next two legs to take a 3-1 lead.
Scotland World Cup star Wright broke back again, and then held throw to make it all square at 3-3.
Both players twice exchanged holds of throw to set up a tense deciding leg, which saw Payne hold his nerve to clinch the Players Championship 12 crown.
Earlier in the day, Wright defeated Martin Schindler, Jan Dekker, Paul Nicholson, Steve Beaton, Ricky Evans and Brendan Dolan to reach his second ProTour final of 2018.
Elsewhere, Players Championship 11 winner Gary Anderson went out to Ricky Evans in the last 16, Daryl Gurney suffered a first round exit to Christian Kist, and Mensur Suljovic went out to Mickey Mansell in round three.
Dave Chisnall lost in the second round to Evans, Michael Smith went out in the quarter-finals to Ian White, Simon Whitlock lost to Cody Harris in round two, and James Wade was beaten by Clayton in the last 16.
Players Championship 12 Results
Sunday May 20, Arena MK, Milton Keynes
Last 128
- Peter Wright 6-3 Martin Schindler
- Jan Dekker 6-0 Terry Temple
- Cristo Reyes 6-3 Peter Jacques
- Paul Nicholson 6-0 Jason Lowe
- Stephen Bunting 6-0 Ritchie Edhouse
- Alan Tabern 6-3 Robbie Green
- Steve Beaton 6-1 Tony Newell
- Jason Cullen 6-5 Ronnie Baxter
- Gary Anderson 6-3 Vincent Kamphuis
- Mark Webster 6-3 Diogo Portela
- Alan Norris 6-4 Tytus Kanik
- Chris Quantock 6-3 Eddie Dootson
- Dave Chisnall 6-4 Adam Hunt
- Ricky Evans 6-4 Steve Hine
- Keegan Brown 6-4 Prakash Jiwa
- Benito van de Pas 6-3 Adam Huckvale
- Mensur Suljovic 6-3 Mark Dudbridge
- Paul Rowley 6-4 Ted Evetts
- Jelle Klaasen 6-3 Jamie Caven
- Mickey Mansell 6-3 Dirk van Duijvenbode
- Simon Whitlock 6-5 Stephen Burton
- Cody Harris 6-2 John Part
- Jermaine Wattimena 6-1 Ryan Searle
- Luke Woodhouse 6-5 Ross Smith
- Rowby-John Rodriguez 6-3 Joe Cullen
- Chris Dobey 6-5 Bradley Brooks
- Jeffrey de Zwaan 6-5 Jimmy Hendriks
- Andrew Gilding 6-3 Davy Van Baelen
- Gerwyn Price 6-3 Robert Marijanovic
- Dawson Murschell 6-1 Simon Preston
- Brendan Dolan 6-3 James Wilson
- Dimitri Van den Bergh 6-3 Richie Burnett
- Michael Smith 6-1 Gary Eastwood
- William O'Connor 6-0 George Killington
- Gabriel Clemens 6-2 Jamie Lewis
- Martin Atkins (Wigan) 6-4 Madars Razma
- Kim Huybrechts 6-5 Joe Murnan
- John Goldie 6-4 Toni Alcinas
- John Henderson 6-5 Lee Bryant
- Ryan Joyce 6-0 Aden Kirk
- Ian White 6-5 Luke Humphries
- Robert Owen 6-5 James Richardson
- Steve Lennon 6-5 Ronny Huybrechts
- Matthew Edgar 6-5 Wayne Jones
- Darren Webster 6-3 Jamie Bain
- Ross Twell 6-2 Sven Groen
- Ron Meulenkamp 6-2 Vincent van der Voort
- Jeffrey de Graaf 6-5 Scott Darbyshire
- Jonny Clayton 6-4 Ryan Harrington
- Kirk Shepherd 6-2 Kevin Burness
- Danny Noppert 6-4 Justin Pipe
- Jose Justicia 6-4 Terry Jenkins
- James Wade 6-3 Darren Johnson
- Nathan Aspinall 6-3 Dennis Nilsson
- Peter Hudson 6-5 Richard North
- Jarred Cole 6-4 Simon Stevenson
- Christian Kist 6-4 Daryl Gurney
- Ryan Meikle 6-4 Mark Wilson
- Josh Payne 6-1 Steve West
- Zoran Lerchbacher 6-5 Scott Taylor
- Mervyn King 6-0 Jim Brown
- Kevin Painter 6-3 Mario Robbe
- Arron Monk 6-5 Adrian Lewis
- Michael Barnard 6-5 Devon Petersen
Last 64
- Peter Wright 6-4 Jan Dekker
- Paul Nicholson 6-4 Cristo Reyes
- Stephen Bunting 6-4 Alan Tabern
- Steve Beaton 6-0 Jason Cullen
- Gary Anderson 6-3 Mark Webster
- Chris Quantock 6-4 Alan Norris
- Ricky Evans 6-3 Dave Chisnall
- Keegan Brown 6-5 Benito van de Pas
- Mensur Suljovic 6-4 Paul Rowley
- Mickey Mansell 6-3 Jelle Klaasen
- Cody Harris 6-4 Simon Whitlock
- Luke Woodhouse 6-5 Jermaine Wattimena
- Rowby-John Rodriguez 6-4 Chris Dobey
- Jeffrey de Zwaan 6-3 Andrew Gilding
- Dawson Murschell 6-5 Gerwyn Price
- Brendan Dolan 6-3 Dimitri Van den Bergh
- Michael Smith 6-2 William O'Connor
- Gabriel Clemens 6-2 Martin Atkins (Wigan)
- Kim Huybrechts 6-3 John Goldie
- John Henderson 6-5 Ryan Joyce
- Ian White 6-5 Robert Owen
- Steve Lennon 6-4 Matthew Edgar
- Darren Webster 6-0 Ross Twell
- Jeffrey de Graaf 6-2 Ron Meulenkamp
- Jonny Clayton 6-1 Kirk Shepherd
- Jose Justicia 6-5 Danny Noppert
- James Wade 6-5 Nathan Aspinall
- Peter Hudson 6-1 Jarred Cole
- Christian Kist 6-0 Ryan Meikle
- Josh Payne 6-4 Zoran Lerchbacher
- Mervyn King 6-5 Kevin Painter
- Arron Monk 6-0 Michael Barnard
Last 32
- Peter Wright 6-2 Paul Nicholson
- Steve Beaton 6-2 Stephen Bunting
- Gary Anderson 6-1 Chris Quantock
- Ricky Evans 6-2 Keegan Brown
- Mickey Mansell 6-0 Mensur Suljovic
- Luke Woodhouse 6-5 Cody Harris
- Jeffrey de Zwaan 6-3 Rowby-John Rodriguez
- Brendan Dolan 6-3 Dawson Murschell
- Michael Smith 6-5 Gabriel Clemens
- John Henderson 6-5 Kim Huybrechts
- Ian White 6-1 Steve Lennon
- Darren Webster 6-3 Jeffrey de Graaf
- Jonny Clayton 6-1 Jose Justicia
- James Wade 6-3 Peter Hudson
- Josh Payne 6-2 Christian Kist
- Mervyn King 6-2 Arron Monk
Last 16
- Peter Wright 6-3 Steve Beaton
- Ricky Evans 6-5 Gary Anderson
- Mickey Mansell 6-2 Luke Woodhouse
- Brendan Dolan 6-3 Jeffrey de Zwaan
- Michael Smith 6-2 John Henderson
- Ian White 6-5 Darren Webster
- Jonny Clayton 6-4 James Wade
- Josh Payne 6-0 Mervyn King
Last Eight
- Peter Wright 6-1 Ricky Evans
- Brendan Dolan 6-4 Mickey Mansell
- Ian White 6-5 Michael Smith
- Josh Payne 6-2 Jonny Clayton
Last Four
- Peter Wright 6-3 Brendan Dolan
- Josh Payne 6-4 Ian White
Final
- Josh Payne 6-5 Peter Wright
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