Larrazabal carded a final round of 67 to finish 14 under par, one stroke ahead of major winners Mickelson and McIlroy, who were both left to rue vital mistakes.
For McIlroy it was taking an incorrect drop on the second hole of his third round, an error which cost him a two-shot penalty and left him fuming about golf's "stupid rules".
Mickelson's wound was also self-inflicted, the Open champion leading by one when he ran up a triple-bogey seven on the 13th after attempting to hit a right-handed escape shot from under a bush, only to suffer a 'double-hit' when his ball struck the bush and bounced back onto his club.
Larrazabal was barely able to believe he had been able to claim his third European Tour title, his previous wins coming in the French Open in 2008 and the 2011 BMW International.
"I beat two of the three most talented guys in my era," said Larrazabal, who likened his vital birdie putt on the 18th to the par putt holed by Martin Kaymer to retain the Ryder Cup at Medinah in 2012.
"The first win in France my brother says was the win of talent. I had 100 putts in 72 holes, not even the best Tiger Woods could have beaten me that week.
"The second win in Munich (in a play-off with Sergio Garcia) was one of belief. This is the win of hard work and team work. I worked so hard for the last two years and over the winter."
Larrazabal thanked his coach, caddie, brother and two physical trainers for aiding his success, but declined to reveal the name of the man "who takes care of the rest".
"I am not going to tell you his name or what he does," Larrazabal said.
"It is the best thing that could happen to my game to meet this guy, but if you tell your secrets someone else is going to do it."
McIlroy had played alongside Larrazabal and the pair were both three under for the day after 11 holes, but while the Northern Irishman's challenge stalled with a run of seven straight pars, Larrazabal birdied the 13th and hit two superb shots to the heart of the 18th green to set up the decisive birdie.
"I can't describe (how frustrating it is)," said McIlroy, who also finished second by a stroke in the same event in 2012 after being penalised two shots in his second round for brushing away some sand that was not on the green but which lay between his ball and the flag.
"I feel like I'm standing here and I should be 15 under par for the tournament and have won by one, but that's the way it goes. I played the least shots of anyone this week. I can count it as a moral victory more than anything else."