Having lost out to Taylor on the Winter Gardens stage two years ago, van Gerwen followed up his 2015 success against James Wade by defeating the 15-time World Champion with a clinical display, hitting two-third of his darts at doubles alongside 12 maximums.
The triumph sees van Gerwen become only the third player - alongside Taylor and Rod Harrington - to retain the prestigious World Matchplay title, as he retained the trophy and pocketed a £100,000 first prize as he won a 12th tournament of 2016.
"It feels amazing to win this title again," said van Gerwen. "I think I played well all through the tournament and I dominated the final - against Phil you always need to step up a bit and I did.
"To beat Phil is always nice because he's a legend and I've got so much respect for him. He knows that and that makes it even better to win this trophy by beating him.
"Phil gave me a chance and he knows that if he gives me a chance I'll take them, and my confidence was there. He's never lost in a World Matchplay final so you know you need to play well, and I did that.
"I think I won this title quite comfortably but I did the right thing at the right moments in this tournament and I didn't make a lot of mistakes. I think I'm the best but you need to show it on that stage, especially in moments like that.
"I'm a really happy man to retain this title, it means a lot to me."
A maximum helped Taylor to win the opening leg, only for van Gerwen to finish 70 to level and 77 to break in the third - following three missed doubles from the Stoke great - before a brilliant 11-darter, featuring two 180s, saw the Dutchman move 3-1 up.
Taylor finished 70 on the bull to hit back in the fifth and shared the next four to stay in touch at 5-4, only for van Gerwen to follow a two-dart 93 checkout with finishes of 65, 110, tops, 63 and 76 in a six-leg burst to move 11-4 up.
Taylor pounced on misses from van Gerwen to win two of the next three, and also hit legs of 11 and 12 darts as he pulled back to 13-8 - but a 13-darter from the Dutchman, featuring a 177 and a 180, was followed by a 112 checkout seemed to stop the fightback in its tracks.
Taylor responded with a 130 finish and then took out 81 for a 12-darter to stay in touch at 15-10, but double 18 and double eight edged van Gerwen towards the title before he landed double 16 to complete a brilliant triumph.
The defeat for Taylor was his first in a World Matchplay final, and the Stoke legend conceded: "I'm gutted. I don't know why but I just didn't have enough, I'm shattered.
"He killed me, he bullied me. Darts has changed, I've been lucky enough to be involved with the greats, this is the greatest as far as I'm concerned.
"This is a fella that’s dominating like I did. He does everything right and at the moment we're not. I've got to start making changes and that starts tomorrow morning."
BetVictor World Matchplay
Sunday July 24
Michael van Gerwen 18-10 Phil Taylor
Best of 35 legs
Michael van Gerwen v Phil Taylor
0-1 - Taylor - with the advantage of throw - hits the final's first 180, and has enough cushion to initially miss three darts at tops to return on double ten.
1-1 - van Gerwen finishes 70 on double nine to level.
2-1 - van Gerwen fires in a 180 to leave 77, and when Taylor misses darts at double 16, eight and four, the reigning champion takes out the combination on tops for the first break of throw.
3-1 - van Gerwen sets up a possible nine-darter with two 180s, and though he is unable to complete a perfect leg he returns - after a maximum from Taylor - to take out double eight for an 11-darter.
3-2 - Taylor hits a 177 to leave 70 before taking out the finish on the bull to hit back.
4-2 - van Gerwen lands a 180 before finishing double 12.
4-3 - van Gerwen misses tops to punish Taylor, who returns on double eight.
5-3 - van Gerwen fires in a 180 and double 16 to restore a two-leg lead.
5-4 - Taylor responds in the same manner with his third maximum and a double 16 checkout.
6-4 - van Gerwen finishes 93 in two darts to edge away again.
7-4 - van Gerwen hits his sixth 180 before finishing 65 on double four to break throw for the second time, opening up a three-leg lead.
8-4 - van Gerwen extends his lead further by taking out 110 on double 16.
9-4 - A seventh maximum from van Gerwen helps to set up a third break of throw, with tops giving him a fourth successive leg.
10-4 - van Gerwen lands his third 180 in four legs, and an eighth of the game, before double 16 pushes him six legs clear.
11-4 - Taylor misses the bull, and van Gerwen finishes 76 to claim a sixth straight leg.
11-5 - van Gerwen posts another maximum, but a miss at the bull allows Taylor in to finish 75 on tops win his first leg in seven.
12-5 - Taylor lands a 177 score to leave 82, but wires tops to reduce the gap as van Gerwen steps in to finish 60 on double ten.
12-6 - van Gerwen misses tops to finish 72, and Taylor hits the bed to break throw for a second time and claim his sixth leg.
12-7 - Taylor wins his third leg in four, landing his fourth 180 and an 81 finish for a superb 11-darter.
13-7 - van Gerwen's tenth 180 is followed by a 73 finish as he restores his cushion.
13-8 - Taylor opens with 180 and 140 before finishing 89 on double 16 for a 12-darter to hit back further.
14-8 - van Gerwen scores 180 and 177 with successive visits before landing double 12 for a superb 13-darter.
15-8 - Taylor lands a 180, but misses three darts at tops to allow van Gerwen in for a fine 112 checkout.
15-9 - Taylor responds by finishing 130 on the bull.
15-10 - Taylor follows his seventh 180 with an 81 finish on tops for a 12-darter to pull back to just five legs behind his rival.
16-10 - Taylor lands a 177 score, but it comes too late to prevent van Gerwen moving two legs away from the title.
17-10 - van Gerwen's 12 180 edges him clear before both players initially miss the bull, but the Dutchman returns on double eight.
18-10 - Double 16 sees van Gerwen seal back-to-back triumphs in style.