Watson, who climbs to a career-high 38th in the world rankings, is the first British woman since Anne Hobbs in 1985 to win a second tour title.
The 22-year-old from Guernsey did not drop a set throughout the week.
She now heads to the Australian Open, where she will play Bulgaria's Tsvetana Pironkova in round one on Tuesday.
Watson won her first WTA title in Osaka two years ago, before her career was interrupted by illness.
She began last year ranked 119th in the world following a bout of glandular fever but has since recovered and begun working with Argentine coach Diego Veronelli.
Victory in Hobart means Watson moved 11 places up the world rankings.
"Thanks to my coach Diego. It's been great working with you," she said afterwards.
"We work really hard but we also have fun."
Brengle, the world number 84, was a surprise finalist having come through qualifying, but the 24-year-old made the early running in the final.
After a rain-interrupted semi-final there was another early shower on Saturday, and Watson then survived a 14-minute opening service game that included six break points.
The service struggles continued in the wind and Watson twice fell a break behind but was able to hit back immediately each time, levelling at 3-3 after a scrappy 44 minutes.
Watson then made the decisive move as she reeled off three games to take the set, and after a steadier start to the second she went ahead again at 4-3.
There was a hint of nerves when she slipped 15-30 behind while serving for the match, but Watson closed out the win and headed to the stands to hug coach Veronelli.
"When I won Osaka in 2012, it was more of a surprise," said Watson. "But here, I feel like I belong.
"I'm obviously very happy. It was tough conditions again today, very windy, and I knew Madison would be tough - we know each other very well on and off the court, and we practise a lot in Florida.
"It really was my toughest match of the week. I was happy I stayed mentally strong and managed to get ahead and hold my nerve at the end."
British number one Heather Watson beat American qualifier Madison Brengle in straight sets to win her second WTA title at the Hobart International.