Rafter found his own rhythm quickly and did not let the American settle.
Giving away 14 years in age and having been made to fight much harder than he wanted the night before in a 7-6 7-6 win over Mats Wilander, McEnroe struggled to make an impact in the final.
Even his serve, which Rafter had said he could not read before the match, was not helping McEnroe and he was left to take satisfaction out of having reached another final this year.
Last month, McEnroe won the Jean Luc Lagardere Trophy in Paris, beating the returning Ivan Lendl along the way.
For Rafter, it was a special feeling to win an event in his native Australia against a man he had idolised as a youngster.
"I really wanted to win this tournament at home in Australia so I couldn't afford to let him back in the match, I had to stay focussed and close it out.," said Rafter.
In the 3rd/4th place play-off, Thomas Enqvist defeated Pat Cash 6-3 7-5.
Rafter will now travel to London for the year's climax - the AEGON Masters Tennis tournament at the Royal Albert Hall.