The 39-year-old, only one ahead overnight, charged four clear with a superb front nine of 31, stretched that to six after 11 holes and ended up taking the £170,744 first prize by five shots.
Olazabal, who took added satisfaction in the win from the fact he is in the process of re-designing the Pula course, finished with a round of 66 for a 10-under-par total of 270.
Second were defending champion Sergio Garcia, fellow Spaniard Jose Manuel Lara and England's Paul Broadhurst, whose level-par final round of 70 cost him the chance of a second win of the season.
Garcia said of Olazabal: "Yes it's his course and he has a little more knowledge of it than most of us, but at the end of the day you still have to hit the shots and hole the putts."
Olazabal is now fourth in the Cup standings - Garcia is second to Colin Montgomerie - and on course to return to the Ryder Cup team next September after a gap of six years.
His last title was the 2002 Buick Invitational in California and the last of his 22 European Tour victories the 2001 Hong Kong Open.
After a slump in his fortunes he has regained some prominence this year, losing a play-off to Phil Mickelson on the US Tour and finishing third in the Open at St Andrews.
His win made amends for his failure in this event two years ago, when he led by two with two to play but ended up losing by one shot to Miguel Angel Jimenez.
This time he had even more strokes in hand and the pressure was off. Even when he bogeyed the short 13th there was no need to panic - and he did not.
With Garcia lifting the title a year ago it means the trio known as "the three musketeers" have all now put their names on the trophy in the three years it has been part of the European Tour.
Broadhurst was level when he made a 12-foot birdie putt on the short second. He and Olazabal both birdied the 383-yard fourth, but then the tide turned.
The two-time Masters champion made it a hat-trick of birdies and added another on the par-three ninth, while Broadhurst bogeyed the eighth and 10th.
Both then played the remaining holes in regulation as Olazabal was able to savour his victory.