Filippo Inzaghi scored both Milan goals - the first coming off his shoulder after he was struck by Andrea Pirlo's free-kick just before half time - before he netted a second in the 82nd minute after being put through superbly by Kaka.
Dirk Kuyt pulled one back for Liverpool a minute from time with a close range header, but Milan held on to lift the trophy.
For Milan it was pretty much a miraculous victory having originally been expelled from this year's tournament and docked eight points from their domestic championship for their involvement in Italy's match-fixing scandal.
However, they were allowed back into the Champions League and Wednesday saw them culminate one of the more extravagant comebacks since Lazarus was raised from the dead.
Two years ago in Istanbul Milan stormed into a 3-0 half-time lead only to allow Liverpool to draw level within a six-minute second half spell, before losing to the Premiership side on penalties.
But this time there was less drama and no Liverpool heroics as Milan atoned themselves for the worst night in their history.
However, for Milan's hardman midfielder Gennaro Gattuso it was revenge personified
"The defeat in Istanbul will stay with me for the rest of my life," said Gattuso, who briefly had a spell with Scottish giants Rangers.
"But today it's Liverpool who are crying, just like we did two years ago," added the non-compromising World Cup winning midfielder.
Milan captain Paolo Maldini, whose season has been plagued by a left knee injury was passed fit to play, enabling him to equal former Real Madrid midfielder Francisco Gento's record of eight European Cup final appearances.
Inzaghi was preferred to Alberto Gilardino to play as a lone striker for the Serie A side. Behind him to offer support were attacking midfielders Kaka, the competition's leading scorer with 10 goals, and Dutchman Clarence Seedorf.
Kuyt's header gave Liverpool hope, but Milan clung on to banish those dark memories of Istanbul.
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