Fernando Torres scored the only goal of the match in the 33rd minute, handing Spain its first title since winning the European crown in 1964.
"It's always disappointing to lose in the final, but the team played a great tournament overall," said German capital Michael Ballack. "Today we made one or two mistakes too many. The Spaniards deserved to win."
The bitter loss for Germany means coach Joachim Löw missed out on the chance to add his name to the trio of Germany coaches who have won a European title. The 48-year-old has earned plenty of praise from the German media at Euro 2008 having inspired an average Germany side to reach the Vienna final after just two years in charge having been predecessor Jürgen Klinsmann's assistant.
He had aimed to follow in the path of Bertie Vogts who steered Germany to the Euro 1996 title after current German team manager Oliver Bierhoff won the tournament with a golden goal against the Czech Republic at Wembley.
As West Germany, Die Mannschaft coached by Helmut Schön claimed the Henri Delaunay trophy for the first time by defeating the USSR 3-0 in Brussels in 1972 with legendary hot-shot Gerd Müller grabbing two goals.
The West Germans bounced back from the disappointment of losing the 1976 European Championship final at the hands of Czechoslovakia with a 2-1 final triumph in Rome as Jupp Derwall coached his side to the title in 1980.
But this was the first time Löw had met Spanish opposition as a coach or player in official competition. He could only watch as Spain's Fernando Torres scored the winner which gave his side a sixth win in the 20 games between the two sides with Germany still leading the series with eight victories.
But Löw really showed his tactical nous in the 3-2 quarter-final defeat of Portugal when he abandoned the trusted 4-4-2 formation for a potent 4-5-1 system which worked with devastating effect.
Having signed a two-year contract extension last autumn, Löw will take Germany to the 2012 World Cup finals in South Africa. His biggest challenge will now be to groom replacements for ageing midfielders Torsten Frings, Michael Ballack and Bernd Schneider, who missed the Euro 2008 finals with a back injury.
However, for the moment Löw was content to praise his current squad.
"I have to compliment the team for what they have achieved over the past few weeks," said the 48-year-old. "It has been fantastic. The players are obviously disappointed, but they have every reason to hold their heads up high."