Cavendish triumphed in a sprint finish at the end of 10 8.8km laps on Whitehall after a near-perfect leadout from Omega Pharma-QuickStep team-mate Alessandro Petacchi.
Team Sky's Wiggins, wearing the leader's gold jersey, rolled in safely in the bunch to claim overall victory.
In claiming his first stage race triumph since the 2012 Tour de France, Wiggins became the second British winner in the 10th edition of the race.
Jonathan Tiernan-Locke won the Tour of Britain in 2012, earning a move to Team Sky, which has now won its home race at the fourth attempt.
Wiggins rode last year's event, abandoning with a chest infection and after making a U-turn at one point to go back to support Cavendish, then his team-mate.
After a challenging year - he withdrew from May's Giro d'Italia and missed the defence of his Tour de France title as Chris Froome won - Wiggins is now in top form ahead of Wednesday's time trial at the Road World Championships in Italy.
The final-day success for British champion Cavendish, who also won stage four in north Wales and stage seven to Guildford, saw him claim victory in the concluding stage of the Tour of Britain for a third successive year.
It was his 10th stage win in the race.
Wiggins and Cavendish's ability is well known, but the eight-day race showed the depth of Britain's talents, with Simon Yates, riding for the British under-23 team, placing third overall.
Yates has had a memorable year, winning the points race at February's Track World Championships and two stages of the prestigious junior race the Tour de l'Avenir.