Pipe continued the form which saw him reach six of the last ten Players Championship finals in 2011 by claiming his fourth ranking title and a £6,000 prize at the Melia Hotel.
The 40-year-old from Taunton showed strong form throughout the event as he picked up seven victories, having begun the day by seeing off Eduardo Sales Lopes, Michael Barnard and Michael Smith.
He then defeated Mark Webster 6-4, saw off Shaun Griffiths 6-2 in the quarter-finals and Ian White 6-4 in the semis, but saved his most convincing display for the decider.
Having hit a 180 in the final's opening leg, Pipe also took the next two to lead 3-0 before finishing 81 in two darts for a four-leg advantage.
Nicholson missed two darts at double 18 in the fifth as Pipe hit a tricky tops with his third dart to move a leg away from the win, which he sealed by following a 180 with an improvised 26 finish of double six and double seven.
"It's a brilliant way to start the year," said Pipe. "Paul's always a tough opponent so I'm delighted to have won the final, and it wasn't as easy as the scoreline might suggest.
"I couldn't have asked for anything else today and it's fantastic to have carried my form from the latter part of last year into 2012.
"It was my first competition using my new Cosmo Darts set-up of barrels, flights and stems, so it´s a further boost to do so well with them."
He added: "I´d like to dedicate the win to my wife Claire - it´s her birthday on Sunday so this will help to buy her a nice present!"
Nicholson, meanwhile, picked up £3,000 as he enjoyed a run to the final, which included a high-quality 6-2 victory over Magnus Caris in the semis.
He also overcame Co Stompe, Steve Beaton and Mark Walsh in his run on the day in a strong start to the year.
White hit the first nine-dart finish of 2012 during his run to the semis, and receives a £2,000 bonus for the feat, which he hit during a first round victory over Mark Hylton.
The Stoke ace also whitewashed Matt Clark, defeated newcomer Keith Stephen and Terry Jenkins 6-5 and came from 2-0 down to see off Darren Whittingham 6-2 in the quarter-finals.
Sweden's Caris reached his maiden PDC ProTour semi-final, picking up wins over Richie Burnett, Dave Smith, Arron Monk, Darren Webster and Wes Newton in picking up £2,000 prize money.
Whittingham followed up his success in winning a Tour Card on the first day of Qualifying School with his best-ever finish on the PDC ProTour as he saw off three-time World Champion John Part, Dutch youngsters Toon Greebe and Jerry Hendriks and Steve Brown on the day.
Manchester youngster Shaun Griffiths joined Whittingham in the last eight, seeing off Dave Chisnall, Belgian Kurt Van De Rijck Colin Lloyd and Adrian Gray, while the ever-consistent Wes Newton and Mark Walsh also reached the quarters.
Norfolk's Darren Webster made a successful return to the PDC circuit by reaching the Last 16 alongside another of last weekend's Tour Card winners, Sussex's Adrian Gray.
There would be no fairytale debuts on the PDC ProTour for Ted Hankey, Dean Winstanley and Tony West, who all failed to reach the Last 64.
Hankey was knocked out in the preliminary round by Matthew Edgar, who hit back from 4-2 down to win 6-4, while Winstanley lost to Kim Hubrechts in round one and West was defeated by Andy Smith.
Both Co Stompe and Michael Smith went close to sharing the nine-dart finish bonus with White, but missed double 12 for perfect legs during the tournament in games against James Hubbard and Justin Pipe respectively.
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