Trained in Germany by Marcel Weiss and ridden by Rene Piechulek the four-year-old struck from off the pace, overhauling runner-up Tarnawa and third-placed favourite Hurricane Lane.
Torquator Tasso became just the third German-trained winner of France's greatest Flat race, emulating compatriots Danedream in 2011 and Star Appeal in 1975.
Torquator Tasso got up close home to score from Dermot Weld's Tarnawa and the Charlie Appleby-trained Hurricane Lane, whose stablemate Adayar was fourth after leading for much of the way.
Mojo Star and Hurricane Lane broke well from their inside draws, but William Buck soon hit the front on the free-running Adayar.
The Derby and King George hero entered the straight a few lengths to the good, but he tired in the final furlong. Tarnawa and Hurricane Lane came on strong towards the inside - but Torquator Tasso was the last to challenge and nabbed the pair in the dying strides.
Weiss, a former assistant to Jens Hershberger, is in just his second year with a licence.
He trains 50 kilometres from Mulheim and is a private trainer for owner Gestut Auenquelle.
Weiss said: "That was beautiful. He's a very nice horse, he's all heart.
"He's a very strong horse. That was amazing.
"Rene is a very cool jockey, very cool. It was his first ride in the race."
It was not to be for Tarnawa, who is now likely to defend her Breeders' Cup Turf crown at Del Mar.
Weld said of Christophe Soumillon's mount: "We know the speed she has, but she just couldn't quicken in the gluey ground.
"We tried so hard. We had her very, very well today and everything was right, but my worry was all the rain that came last night.
"This filly has a lot of pace - we saw the way she won at the Breeders' Cup. She just couldn't pick up today.
"I did say in one of my interviews beforehand this was a wide-open Arc and could well be one for an outsider.
"This is a very tough game and being a trainer is a very tough life. These are the knocks you take.
"I just wanted to win for His Highness the Aga Khan, as much as myself. We had a filly who was at her very maximum today, but in that ground she just couldn't quicken like she can.
"I'll speak with His Highness and decide, but the Breeders' Cup is a definite possibility."