Backed by a vocal crowd at La Chapelle Arena and watched by Denmark's King Frederik X, Axelsen demolished world champion Kunlavut Vitidsarn of Thailand 21-11, 21-11 in 52 minutes.
The lanky Dane became the first man to retain his Olympic men's singles title since Chinese great Lin Dan, who won in 2008 and 2012.
Axelsen said winning in Paris meant more than his first gold in Tokyo, where he clinched the title in a largely empty venue because of Covid restrictions.
"This feeling right now means extra to me because my wife and our two daughters were in the stands," said the 30-year-old.
"I am so proud that I have performed in front of the king of Denmark. I'm just on the moon right now.
"Today I felt like the king of the court," he added.
Axelsen also won bronze at the 2016 Rio Games, giving him a bigger haul of Olympic medals than the legendary Lin.
The Dane brushed aside suggestions that he had reached the same level as the Chinese player, calling him the greatest of all time.
"For me he is the GOAT and I'm just very happy and proud to be, in Olympic terms, on the same level," Axlesen said of Lin, who was also present in the arena.
"But in my eyes, he stands as the best ever."
Thai breakthrough
Kunlavut's silver was Thailand's first-ever Olympic medal in badminton.
It was also their first medal of the Paris Games.
Kunlavut, who was seeded eight to Axelsen's two, said the Dane was "very difficult to play against".
"Everything he does is very good, but for me it's OK," said the 23-year-old.
"It's my first time at the Olympics and I got to the final, so I'm very happy."
Kunlavut made a good start but Axelsen soon settled into his rhythm and built up a commanding lead in the first game.
He closed it out in 24 minutes, raising his hand in apology after winning the game with a shot that hit the net tape and flopped over.
Axelsen was again unstoppable in the second game, unleashing the full force of his 6ft 4in (1m94) frame to rain down smashes.
After clinching the title, he grabbed a Danish flag and tore around the arena.
"To be honest I didn't even know how I would like to celebrate when I won because I was so focused on winning," said Axelsen.
"I was so focused on being calm and playing the right shots."
Malaysia's Lee Zii Jia took bronze after beating India's Lakshya Sen 13-21, 21-16, 21-11.
China topped the badminton medals table for a seventh straight Olympics, winning golds in the mixed and women's doubles.
Taiwan won men's doubles and South Korea's An Se-young took gold in women's singles.
