Mills, son of former England and Leeds United defender Danny, recorded a new personal best of 1.48.42 and was never headed at the front of a strong field as he won by almost a second.
Italian athletes took the other places on the podium with Andrea Romani second in 1.49.58 and Simon Barontini third in 1.49.78.
Mills, who lives in Harrogate, said: “I was absolutely delighted with the result. The aim was to go and win gold from the off but the PB was an added extra.
“I saw on the close a couple of time what pace I was going at but I didn’t have a clue where the Italians were. I was just focused on getting to the line.”
The gold medal was the 17-year-old’s first on the international stage but he has visions of earning more success on the world stage in the future.
He represented England at the Commonwealth Youth Games last year and finished fifth.
The Harrogate Harriers Athletics Club runner added: “I would like to make it to the top and win an Olympic gold medal. That’s the aim but it’s going to be very tough to get there.”
The gold medal run was the first time Mills had broken one minute 49 seconds, and shaved more than half a second off his previous personal best set in May.
It also put him seventh on the all time list of British U17 800m runners.
The St Aidan’s School, Harrogate pupil will step up into the U20 category from next year where he will target a place at the European Junior Championships.
Despite 19 international caps for England, proud dad Danny Mills admitted watching his son in Georgia had been a “nerve-wracking” experience.
“It’s completely different watching, you have no control of what’s happening and you just want them to do well for themselves,” said the ex-Leeds United defender.
“He works unbelievably hard and he has proven to himself what he wanted to do.
“His coaches are fantastic. Jo Day has been magnificent with him and without her he wouldn’t be in the form or shape he is today.
“People will always say it’s easy because he has got sporting genes but it’s nonsense.
“He is working six days a week and making big sacrifices at such a young age.
“This success just goes to show what can be done with great dedication.”
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