The giant Croatian, who suffered from viral meningitis this year, stunned the home fans with a 6-3 7-6 success over their home hope in Sunday's final.
Karlovic, 34, was looking back to something like his best during the claycourt event as he boomed down 104 aces during the tournament.
Karlovic won the opening set of the final in just 31 minutes as he overpowered his opponent, but Falla fought back in the second to force a tie-breaker.
However, Karlovic's power again proved to be decisive as he sent down two aces, numbers 15 and 16 of the match, to claim the breaker and the title.
Karlovic showed no signs of nerves in his first final in three years, and the win will move the former world No 14 back up into the top 100 from his current ranking of 155.
A fifth title on the ATP Tour for Karlovic came in his eighth final, and in a year where age is no barrier to success he became the 11th winner aged over 30 this season.