The 33-year-old Scot sank a four-foot putt on the 18th at the Real Club de Campo Villa de Madrid for a final-round 70 to finish on 14 under and deny home favourite Eugenio Lopez-Chacarra and France's Victor Perez on Sunday.
Forrest, who shared a one-shot lead with England's Joe Dean going into the final round, sealed his third DP World Tour title and a place at both next year's Masters and The Open.
"I'm in shock, honestly, pure shock just now," he said after his first overseas win.
"It's been such a tough year. I've just not played well at all.
"I've got good memories of this course, this tournament, from previous years, and to walk away with a win is just unbelievable."
Forrest headed to the final hole level with Lopez-Chacarra and Perez on 13 under as a playoff beckoned, but held his nerve to hole his fifth birdie of the day in a see-saw round that also included four bogeys.
Spaniard Lopez-Chacarra had shot into a share of the lead after three successive birdies at the second, third and fourth and followed an eagle at the seventh with another birdie at the next before he too birdied the last to finish 13 under.
Perez, who began the day one shot off the lead on 12 under, made back-to-back birdies at the 16th and 17th to join a four-way tie for the lead at 13 under with two holes to play, before he parred the last two holes.
Denmark's Jacob Skov Olesen was also on 13 under heading into the last but made a bogey to finish outright fourth.
Dean, whose dropped shots at the second and 12th sandwiched a birdie at the fourth, birdied the 15th to move to 13 under, but bogeys at the 16th and 17th saw his challenge fade and he finished tied for fifth alongside Daniel Brown.
Englishman Brown birdied the last five holes for a bogey-free 29 on the back nine and made nine in total in a final-round 64 to soar up the leaderboard.
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