The in-form St Helens thrower had trailed 3-1 and 4-3 before storming back after the break to win five straight legs and pocket the £20,000 winner's cheque at the world famous sports venue.
'Bully Boy' set the tempo on finals day when thumping Gary Anderson 8-3 in the quarter-finals - and then hit eight 180s in a pulsating 8-6 semi-final victory over world champion Peter Wright.
The 31-year-old needed all of his powers of recovery when van Gerwen had finished 130 in leg seven to move ahead.
But he came fighting back with tops, then legs of 14, 14 and 12 darts in a scintilating finish to complete the win.
"I'm playing well and picking up titles, and it's unreal the way things have swung in my favour," said Smith.
"Since I won the last night of the Premier League, my confidence has grown and grown. I wasn't chasing results, I was chasing wins and I've just won the first ever tournament at Madison Square Garden."
Smith told reporters: "Now that I'm making finals each week and winning them - and the way I'm winning them - is massive for my confidence and self-belief."
Smith, this year's world championship and UK Open runner-up, arrived in the Big Apple in a rich vein of form having won Premier League Night 16 and a European Tour title.
Dutch favourite van Gerwen said he had no complaints with his defeat to Smith and that he hoped he and his rival had made a lasting impression on US darts fans.
"This is special but I can say that I didn't win, Michael didn't win - I think darts won tonight especially here in America," he said.
"I think this is a massive step forward for the professionalisation of darts in general and the global sport of darts."
The World Series of Darts continues on June 10-11 with the Viaplay Nordic Darts Masters at Forum Copenhagen.
The 2022 US Darts Masters resuts
Saturday 4 June
Michael Smith 8-3 Gary Anderson
Peter Wright 8-3 Leonard Gates
Gerwyn Price 8-7 Jonny Clayton
Michael van Gerwen 8-3 James Wade
Michael Smith 8-6 Peter Wright
Michael van Gerwen 8-4 Gerwyn Price
Michael Smith 8-4 Michael van Gerwen