The Englishman took a four-stroke lead after finishing one shot short of Fredrik Jacobson's course record of 60 set in 2003. Westwood went 7-under on the last seven holes, shooting 29 on the back nine. The 61 tied his career best.
Soren Hansen was second with a 65, ahead of Nick Dougherty and Simon Dyson at 66. John Daly shared fourth place with a 67.
Daly eagled the par-5, 523-yard 15th hole, a feat duplicated by Westwood, who chipped in from 40 feet.
Westwood had 10 birdies to go with the eagle. On the last seven holes, he dropped two birdies from 18 feet, one from 12 and another from 20.
Westwood said poor putting cost him a chance to win his last two events. After finishing tied for sixth at last week's European Masters, he returned home Sunday and rummaged through a garage full of old putters.
'I sifted through a few and picked one out that felt nice and sat nice,' Westwood said. 'My putting has been dreadful for most of the year, and it was starting to irritate me, but I made more putts today outside of 15 feet than I have in the past two weeks.'
The Mercedes-Benz is the only German tournament Westwood hasn't won.