The eighth seed's surprise win in one hour, 22 minutes was the first loss in Beijing for the Spaniard, who as top seed had set a blistering pace all week.
Djokovic powered into Sunday's final after a 6-3, 6-3 win over Sweden's Robin Soderling, which also ensures he will claim the number three ATP ranking next week ahead of Andy Murray.
Djokovic, the second seed, improved his record over French Open finalist Soderling to 4-0 and maintained pace as the top winner on the men's circuit with 62 victories in 2009.
Murray has not played on the ATP World Tour since the US Open, missing the Asian swing due to complications from a wrist injury.
"It was another great win," said Djokovic, who is 2-5 in finals so far in 2009. "I had to take my chances. I hope I can win this title."
Nadal's defeat was the heaviest he has suffered since going down 6-0, 6-1 to Russian Mikhail Youzhny in the Chennai final in January, 2008.
The Spaniard stood a perfect 14-0 in the capital after winning the 2005 China Open and claiming the Olympic gold medal in 2008.
But Cilic ripped through the opening set with six aces and set up match points on two separate occasions in the eighth game of the second with untouchable serves.
The desperate Nadal saved them both, breaking to stay alive at 3-5 but Cilic broke back for the upset victory.
The loss was Nadal's ninth of the season against 58 wins and five titles.
Nadal was playing this week for the first time since the US Open due to an abdominal muscle pull.
He goes into next week's Shanghai Masters as top seed with, Roger Federer missing the Asian swing to rest after reaching all four Grand Slam finals.
Djokovic stands at 3-0 over Cilic, including a victory this season in Dubai.