The Malton golfer finished on 18 under par overall – just one shot behind the leading quartet – after a super final round.
Dyson carded seven birdies in a fine fourth round, but was made to rue a bogey on the 12th hole that meant the play-off was agonisingly out of reach.
Dyson finished a shot better off than one-time leader Danny Willett, the Sheffield golfer had rounds of 64 68 71 and 68.
But it was Fabrizio Zanotti who triumphed in the four-man play-off to win his first European Tour title in the most dramatic fashion yesterday.
Zanotti, Henrik Stenson, Rafael Cabrera-Bello and Gregory Havret were all in with a shout of lifting the title after they could not be separated on 19 under par after the final round.
It took until the fifth extra hole for Zanotti to clinch it, with Havret and Cabrera-Bello bowing out on the second and fourth extra holes respectively.
It means that Zanotti is now the first golfer from Paraguay to win on the European Tour and improves his previous best finishes of runner-up in the 2009 Open de Espana, 2010 KLM Open and 2012 Irish Open.
Cabrera-Bello would have been the favourite in many eyes going into the titanic play-off tussle after notching an eagle and a birdie on the 17th and 18th holes already yesterday.
But Zanotti was the only player out of the four leaders to avoid carding a bogey in the fourth round and he maintained that statistic when it mattered most.
“I have really been playing very well in the last few weeks so I knew that if I had a good round I would have a good chance,” he said.
“I have been working a lot and trying to bring up my confidence to get to this moment and finally I am here.”
World No 2 Stenson had looked to be in control on the first extra hole, with a birdie in sight, but he missed to keep all four men in the hunt.
If the Swede was stewing over that opportunity as he walked back to the 18th tee he did not show it, finding an unlikely birdie to once again put the pressure on his rivals. Frenchman Havret became the first casualty, but the other two men rose to the challenge.
Stenson, who won the BMW International via a play-off in 2006, looked like he knew exactly what was required to win on the third extra hole, putting himself in position to make an eagle. But he just missed his putt and all three men birdied as rain started lashing down.
The start in Cologne had been brought forward due to forecasts for storms and there were fears it might interrupt the thrilling climax at one point.
Cabrera-Bello finally cracked on the fourth extra hole, finding the lake to bow out, while this time it was Zanotti’s turn to wobble and miss a birdie opportunity after Stenson pitched to within a few feet of the pin from a difficult position.
Back on the 18th, Stenson followed Cabrera-Bello into the water while Zanotti fell short of the green but, crucially, managed to stay dry.
Stenson finally conceded after he was unable to make his shot from bunker fall to prompt celebrations from Zanotti.
Overnight leader Pablo Larrazabal slipped off the pace, dropping his first shots of the weekend with two bogeys on the ninth and 14th holes, as he fell two shots behind the four-strong leading pack.
Florentyna Parker played a superb final round to win the Ladies Italian Open and complete an English one-two with second-placed Holly Clyburn in Umbria yesterday.
Parker carded an excellent 68 on the final day at Perugia Golf Club to score seven-under-par and finish one stroke ahead of Clyburn, who played a closing round of 70.
An albatross on the 14th put Parker clear as she holed her second shot from 152 metres but the leading pair remained level until the 17th.
Clyburn bogeyed, hitting her tee-shot under a bush and taking a penalty drop before missing a putt for par from six feet.
Parker then held her nerve with an excellent up and down on the 18th green to secure her second Ladies European Tour victory.
Parker said: “It’s been too long. My grandpa is Italian so it was actually the perfect week.
“I played quite well from the start. I was one under through nine and bogeyed 10 so I was level after 10 and I said to my mum, ‘okay, three more birdies’.
Doncaster’s Rebecca Hudson was third on five-under-par after a final round of 71 while Italian Diana Luna came fourth.