Colsaerts won a slow final 1 up in southern Spain for his second European Tour title and earn a winner's check of $900,000.
McDowell, the 2010 U.S Open champion, bounced back after falling 1 down three times on the front nine, but was frustrated on the long closing stretch with his iron play letting him down.
Colsaerts had a two-hole lead after No. 16 and although his advantage was cut when he three-putted the next hole, he made par on the last hole to win one of the most prestigious titles on the calendar.
''I can't feel anything at the moment,'' he said. ''To have my name next to so many major winners is a dream come true.''
The victory lifted Colsaerts into 10th place in the Ryder Cup points table – the last automatic spot for the European team – but perhaps more importantly demonstrated to team captain Jose Maria Olazabal his prowess at match play ahead of the September matchup against the United States in Medinah near Chicago.
It would be Colsaert's first appearance for Europe and would cap a successful season in which he has grabbed seven top-10 finishes in 11 events – the most of any player so far.
''It's always been a dream of mine to play in a Ryder Cup,'' Colsaerts said. ''I know I am well placed, but there's still a long way to go.''
Colsaerts is the longest hitter on tour – overtaking Alvaro Quiros of Spain in that category this season – and his power and distance off the tee came in handy all week on the long Finca Cortesin course, but especially on Sunday when winds blew as strong as 30 mph in the afternoon.
It forced both finalists to constantly back off from their shots, meaning their round took more than 4 1/2 hours. Organizers had earlier taken all four semifinalists off the course because of the threat of lightning, causing a suspension of an hour.
Having come from 4 down after four holes in his semifinal against Paul Lawrie to win at the second playoff hole, the 29-year-old Colsaerts – whose grandfather played basketball and water polo for Belgium at the 1920 Olympics – was never behind in the final.
''The conditions were brutal – you had to grind it out,'' Colsaerts said. ''These two games today really killed me.''
After going 2 up on No. 13 and with an ideal closing stretch for a heavy hitter, Colsaerts looked in good shape but McDowell birdied the next before his opponent three-putted on the long par-4 No. 15.
However, McDowell's momentum was halted when he hooked his second shot on No. 16 left, he threw his fairway wood to the ground. He missed a 12-foot putt and was 2 down with two to play.
''The elements played a huge part,'' McDowell said. ''I'm disappointed that they probably came out the winner today rather than the two players.
''They really played into his hands the way he drove the ball. He's got a great wind game and he's a fantastic talent. I got beat by the better man.''
Colsaerts three-putted No. 17 to reduce his lead to 1 up. But he hit a booming drive on No. 18, McDowell over hit a wedge to the green leaving Colsaerts two putts to become the first Belgian to win twice on the European Tour.