After Sheffield teenager Matthew Fitzpatrick won the silver medal for the leading amateur, the stage was set for an English double with Westwood starting two shots ahead and then stretching his lead at Muirfield.
But he collapsed over the closing holes as Mickelson put behind him his own heartache at missing out on the US Open title five weeks ago to claim his fifth major in thrilling fashion.
The 43-year-old Californian started the day five shots adrift of Westwood but birdied four of the closing six holes to win by three shots from Henrik Stenson.
Worksop’s Westwood, 40, fell back into a tie for third with Ian Poulter and Adam Scott after a 75 left him four shots back on one over par.
Poulter had threatened to win from even further back than Mickelson after picking up five shots in four holes around the turn, but he gave one back coming in and signed for a 67.
Scott at one time had the lead himself before falling away, while playing partner Tiger Woods was unable to sustain the challenge he had threatened on Saturday and finished a shot further back alongside Zach Johnson and Japan’s Hideki Matsuyama.
Mickelson described his 66 as the best round of his career and a day he will cherish for the rest of his life, while Westwood was left to put a bold face on yet another missed opportunity in his search for that elusive first major.
“For me to be last off in the Open Championship was probably a new experience and I really enjoyed it,” said Westwood.
“It means a lot and you go out there and try your best, but there was no pressure.
“I was amazed to be in the lead going into the fourth round, because every time I turned into the wind I was really struggling.
“I didn’t feel like I was striking the ball well but I putted lovely this week and I made my fair share so there were a lot of positives.
“I’m not too disappointed. I don’t really get disappointed with golf any more.”
Westwood had a three-shot lead when he birdied the par-five fifth but he began dropping shots with some errant tee shots.
“I didn’t really play well enough (yesterday),” added Westwood, who has now finished either second or third in a major eight times.
“I didn’t play badly, but I didn’t play great. It’s a tough golf course and you’ve got to have your ‘A’ game. You’ve got to play well to give yourself your own momentum, and I just couldn’t get there. Going from three under back to one under just halted my momentum a bit.
“I didn’t do a lot wrong, I just didn’t do enough right.
“I finished top three in a major. I would like to have won but you can’t not take positives from top three in a major. I keep putting myself in contention.”
Mickelson’s win means England’s wait for a first Open winner since Nick Faldo in 1992 goes on, with the American delighted to overcome his sixth and most heartbreaking US Open runners-up finish last month.
“This is just a day and a moment that I will cherish forever,” said Mickelson, who claimed his first victory in Britain at the Scottish Open at Castle Stuart a week earlier.
“This is a really special time, and as fulfilling a career accomplishment as I could ever imagine.
“I’m playing some of the best golf of my career. It’s the best I’ve ever putted. (Yesterday) will be one of the most memorable rounds of golf I’ve ever played. It’s probably my greatest and most difficult win. It is great to be part of any Open Championship and to win at Muirfield feels amazing.”
Mickelson finished tied second two years ago and fourth at Troon in 2004, but otherwise had rarely contended in more than two decades at the Open.
He said: “It’s been the last eight or nine years I’ve started playing it more effectively, I’ve started to hit the shots more effectively.
“But even then it’s so different than what I grew up playing. I always wondered if I would develop the skills needed to win this championship.
“This has been the biggest challenge for me to overcome and capture this championship, this trophy.”
Mickelson birdied the 13th, 14th, 17th and 18th to complete victory in style and get back to No 2 in the world for the first time since September 2010.
“I was behind the whole day and one over for the championship when I was on 13,” he added. “I hit a really good five iron (to 10ft) and it was a putt that was going to make the rest of the round go one way or another. I just thought if I made it, it would give me some momentum, get me to even par, a score I thought had a good chance of being enough.”
British Boys’ champion Fitzpatrick was celebrating winning the silver medal after weekend rounds of 73 and 72 saw him finish on 10 over par, five shots clear of the only other amateur to make the weekend, Jimmy Mullen.
Fitzpatrick finished in a tie for 44th and would have netted in the region of £19,000 had he been professional. Although he does not begrudge missing out on the money given the experience he gained, it is back to reality this week.
He revealed earlier in the week that he baby-sat regularly for some of his Hallamshire clubmates and when asked if that would now end, he said: “I’m not sure about that. Hopefully it might but I could do with the money, because I don’t really have a job other than this.”
Sheffield’s Danny Willett finished strongly, with a level-par 71 earning the 25-year-old a share of 15th place.
Two pages of Open reports and reaction: Pages 2 and 3.