Larrazabal made his short put on the par-5 18th after Garcia missed from about 5 feet, giving him his first title since winning the Alstom Open de France in 2008.
"I had nothing to lose," Larrazabal said. "If you tell me who you want to beat in a playoff, then I would say first Tiger Woods and then Sergio. I have a lot of respect for Sergio, he is one of my heroes. He is still for me one of the best players in the world."
The outcome also allowed both players to qualify for the British Open at Royal St. George's next month. Their prize money put them atop a money list from six European Tour events starting with the BMW PGA Championship and ending in Munich.
"I think my game is the type of game for the Open," Larrazabal said. "When we played the first hole of the playoff, we congratulated each other."
Garcia birdied the 18th during his final round to shoot 4-under 68, matching Larrazabal at 16 under and forcing the playoff. They matched each other's score at No. 18 twice, then did the same at No. 12 and No. 17, before playing the last hole for the fourth time on Sunday.
Before the playoff, Larrazabal had birdies at Nos. 1, 6, 7 and 9 before two more at No. 10 and 11 gave him the outright lead. Garcia started with five pars but, having relinquished the lead, made a long eagle putt at No. 9 to give him back a share of the lead.
It remained close until the 18th, when the two players were deadlocked.
"Pablo and I played some great golf in the playoff. It is a pity one of us had to lose," Garcia said. "But seventh at the U.S. Open and second now, this shows my game is coming around."
Kaymer will drop out of the top three when the world golf rankings are published Monday, allowing U.S. Open winner Rory McIlory of Northern Ireland to rise to third behind the English duo of Luke Donald and Lee Westwood. It will be the first time that players from Britain and Ireland have held the top three spots.