Northern Ireland's 27-year-old Allen outplayed China's Ding in the final of the season's fifth European Tour event to take the 25,000 Euro top prize.
Left-hander Allen won seven matches during the event to land his first title since he won the Haikou World Open seven months ago.
He took the opening frame of the final with a break of 76. Ding looked set to level until he missed a red to a centre pocket on 55, and his opponent battled his way back into the frame and took it on the colours.
A superb run of 100 put Allen 3-0 ahead, before Ding pulled one back with runs of 40 and 32. But there was to be no fight back as Allen's 74 in frame five saw him over the winning line.
"The way my form has been over the last few months, it's a big achievement to win here," said Allen. "A lot of it is down to Terry Griffiths, we did some work last week and he made a change on the technical side and helped me to be more positive. I need to keep putting the work in with him and hopefully it will pay dividends.
"I was able to have a couple of hours rest after my semi-final whereas Ding had a long match, so maybe he was not as fresh as me for the final, though I'm sure he was just as motivated.
"The crowd and the atmosphere here were brilliant. Snooker is taking off in mainland Europe which is good to see."
The tournament brought snooker to the town of Mulheim for the first time, and drew large crowds throughout the three days, emphasising snooker's popularity in Germany.
World number 75 Robbie Williams, from The Wirral, was the event's surprise package as he reached the semi-finals before losing 4-0 to Allen. Ding edged out Stephen Maguire 4-3.
The European Tour comprises eight events, with the top 24 on the final Order of Merit to qualify for the Grand Finals next March, to be joined by eight more players from the Asian Tour Order of Merit. The next event is the Kay Suzanne Memorial Cup in Gloucester from November 7 to 10.
Results (last 16 onwards)
Ben Woollaston 4-0 Chris Norbury
Mark King 3-4 Stephen Maguire
Barry Hawkins 2-4 Ryan Day
Ding Junhui 4-3 Anthony Hamilton
David Gilbert 3-4 Robbie Williams
Luca Brecel 4-1 Stuart Bingham
Kyren Wilson 2-4 Judd Trump
Mark Davis 3-4 Mark Allen
Woollaston 3-4 Maguire
Day 1-4 Ding
Williams 4-3 Brecel
Trump 1-4 Allen
Maguire 3-4 Ding
Williams 0-4 Allen
Ding 1-4 Allen
PICTURES by Monique Limbos
Ball by ball scoring and results from tournaments