The Spanish third seed produced a performance combining awesome power with delicate touch to win 6-2, 6-2, 7-6 (7/4), collecting the fourth Grand Slam of his young career.
Alcaraz equals the Open Era record for most Grand Slams won at the age 21 or under, joining Boris Becker, Bjorn Borg and Mats Wilander.
And he is just the sixth man to win the French Open and Wimbledon back to back.
Djokovic, 37, who had knee surgery just weeks ago, was aiming to win a 25th Grand Slam -- which would have been a record in the men's and women's game.
But he had no answers in the Centre Court sunshine as the electric Alcaraz pounded him from the back of the court and treated the crowd to an array of his trademark drop shots.
Alcaraz seized the initiative in a first game of breathtaking quality lasting 14 minutes, taking advantage of his fifth break point.
The Spaniard settled quickly into his routine on serve and went up a double break when Djokovic double-faulted in the fifth game.
The shellshocked Serbian, playing in his 10th Wimbledon final, held serve to love to close the gap to 5-2 but dumped the ball into the net to hand the Spaniard the first set.
Alcaraz was immediately on the front foot in the second set, forcing a break in the first game and fending off pressure on his own serve to take a 2-0 lead.
A Djokovic backhand into the net in the seventh game handed Alcaraz another break point and a double fault put the defending champion 5-2 up and on the cusp of a two-set lead.
The Centre Court crowd, including Catherine, Princess of Wales, looked on in disbelief as their hopes for a titanic tussle evaporated.
Djokovic fended off another of clutch of break points early in the third set to stay alive and showed signs that he was finding his range.
But the Spaniard carved out three break points in the ninth game, arrowing a passing shot past his stranded opponent to move 5-4 ahead.
Alcaraz stepped up to serve for the championship but squandered three match points, missing a straightforward drive volley as Djokovic broke for the first time in the match.
But he recovered his composure quickly as the set went to a tie-break.
Djokovic went wide with a forehand to give Alcaraz a 5-3 lead and the Spaniard won the title with his fourth championship point.
The result means Djokovic has still not beaten a top-ten player this year and has yet to win a title.
The Serbian will now turn his attention to the Paris Olympics as he seeks to win gold for the first time.
