The 2005 world champion looked to have the title in the bag when he opened up a 9-5 lead in the best-of-19 final with O'Sullivan horribly out of sorts.
But the Rocket staged a fine comeback and had a tricky green to the middle to force a decider. But he caught it thick, letting Murphy in to clear the last five colours and take frame and match.
O'Sullivan's frustration when he missed the crucial green was clear, rapping the table with his cue, but he conceded after the match that the better player had won.
Murphy's win adds to a trophy cabinet which already includes the sport's "Triple Crown" - the World and UK Championships and the Masters, while his Gibraltar Open win in March was his seventh ranking title.
O'Sullivan looked in ominous form early on, with breaks of 97 and 98 to lead 2-0, but Murphy - who had never won a match at the tournament until this year - took a close third and then reeled off breaks of 70, 85 and 53 for a 4-2 advantage.
O'Sullivan made 61 and 65 in the next and 72 to level the match, but the final frame of the opening session went narrowly Murphy's way.
It was to prove crucial, as breaks of 86 in frame 10 and 56 and 74 in the 12th put Murphy four frames ahead and in control.
The next two were shared before O'Sullivan reeled off three in a row, including the only century of the final with a 108 in frame 16.
Murphy jawed a red when on course to win frame 18 and the match, but O'Sullivan's reply came up short. He played a good positional shot onto a difficult yellow and potted it along the cushion, but could only leave the green to the left middle and missed it on the far jaw allowing Murphy to finally finish the job.
While he savoured the £100,000 prize, O'Sullivan was left to reflect on a second successive runner-up finish in Coventry having lost last year's final to John Higgins.
Murphy's success also secured an 18-point profit for our man Crawford - who was assured of a tidy profit on the night having also advised a win-only bet on O'Sullivan. Check out his tips for the Shanghai Masters, which starts on Monday, here.
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