With the scoreless match inching towards a penalty shootout, and the Dutch down to 10 men, Andres Iniesta picked up a pass from Cesc Fabregas to fire home from close range four minutes from the final whistle in Africa's first World Cup.
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The goal sparked euphoric scenes as the Spanish team and bench raced after Iniesta into the corner of the Soccer City stadium to celebrate while the Dutch appeared stunned.
It was the first time the European champions had reached a World Cup final and a bitter disappointment for the Netherlands who finished runners-up for the third time after previously losing the 1974 and 1978 finals.
It was also the first victory by a European side outside their continent.
But the game was far from the classic final hoped for from the two most impressive teams in the tournament and was for large stretches a sterile stalemate.
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Spain looked dominant for long passages but a ferociously physical Netherlands team often broke up their rhythm and their renowned precision passing in midfield.
BRUISING ENCOUNTER
In a bruising encounter in the huge Soccer City stadium, referee Howard Webb showed 13 yellow cards and sent off Dutch defender John Heitinga in extra time.
Despite the disappointing quality of the match, the final was a triumphant end to a highly successful tournament for South Africa who confounded years of pessimistic predictions that it would be ruined by violent crime and chaos.
To cap their pride, Nelson Mandela, much loved father of post-apartheid South Africa, briefly toured the pitch waving to the crowd just before the match began.
Mandela, 91, who is in frail health, was driven around in a golf cart surrounded by bodyguards and greeted by an ecstatic crowd chanting his clan name Madiba and blowing vuvuzela trumpets.
The former president, who led South Africa out of apartheid in 1994, had been unable to attend the opening ceremony because of the death of his great grand-daughter in a car accident the night before.
Spanish coach Vicente del Bosque told television: "It was a very difficult match. we have fantastic players. We could have scored another goal or two. But I think the result was deserved. It's a very happy day for me."
Dutch coach Bert van Marwijk said the better team had won in the end: "It is very sad. These three or four final minutes and then you lose. I really had thought even with 10 we would be able to do the penalty shoot out.
"It is bitter but that is sport. It is harsh."
Both sides missed good goalscoring opportunities, most notably Dutch winger Arjen Robben who was twice denied by brilliant
