The four-time Grand Slam champion from Spain edged a captivating final 6-7(6), 6-4, 7-6(3) for his fourth ATP crown of the year and 16th overall.
Alcaraz, who is set to return to number two in the world behind Sinner, was 3-0 down in the final-set tiebreak only to fight back and win in three hours, 21 minutes.
The dramatic triumph ended Sinner's run of 14 victories in a row and saw him deposed as the Beijing champion after an almighty fight.
In front of a packed house in Beijing, the early exchanges were nervy with both players under immediate pressure on their service games.
Sinner was the first to blink, with second-seeded Alcaraz breaking for a 3-1 lead and celebrating with a pump of the fist.
The Spaniard held easily for 4-1 and had his opponent uncharacteristically rattled.
Italy's Sinner has admitted to sleepless nights over a doping case that was reignited at the weekend when WADA said it had appealed the decision to clear him.
Alcaraz served for the set but US Open champion Sinner grabbed the break back when he needed it most.
Sinner then saved a set point on his own serve to force the tiebreak and saved another in the tiebreak before taking the set at his first opportunity when Alcaraz fired long.
It was the first set Alcaraz had dropped all week.
The second set was just as tight.
Both players saw chances come and go but they went with serve until Alcaraz broke for 5-4, before holding with ease to send the final into a third set.
The decider again went to a tiebreak, where Alcaraz finally prevailed on his first match point.
Sinner has been playing in Beijing under fresh scrutiny.
He twice tested positive for a steroid in March but tennis authorities cleared him of wrongdoing and allowed him to keep playing.
In August, the International Tennis Integrity Agency (ITIA) accepted Sinner's explanation that the drug entered his system unintentionally when his physiotherapist used a spray containing it to treat a cut, then provided massage and sports therapy to the player.
The World Anti-Doping Agency (WADA) on Saturday said it had appealed and was seeking a ban of up to two years.