Despite not replicating the free-flowing tennis of previous rounds, Federer dug deep to win big points. He broke the 45th-ranked Seppi for the first time at the fifth attempt in the decisive moment of his 10th Halle final.
"Of course it's a special moment for me, to win here for the eighth time before Wimbledon. It doesn't happen without making an impression," Federer said.
The 17-time Grand Slam winner sealed his 15th title from 20 finals on grass and his 86th career title from 130 finals overall. Lleyton Hewitt is next on grass with eight titles.
Straight after extending his record haul of titles at Halle -- Russia's Yevgeny Kafelnikov is next with three -- Federer said he was happy with his play.
"This week has been great when I look at the whole thing. I don't think I was broken in the last four matches I played," the Swiss said. "It gives me confidence in the crucial moments to know my game was right there."
Seppi was in the final after Kei Nishikori withdrew from their semifinal with a calf injury -- and Gael Monfils pulled out of the quarterfinal with a knee problem -- but the Italian showed no apparent lack of match fitness.
Seppi missed three break points in the first set, including two set points that Federer defended with two successive aces.
Federer took the first of his five set points in the tiebreaker and Seppi missed another break point opportunity early in the second when he hit a return into the net.
Federer's first break chances came at 4-3 in the second set but Seppi won all three to level. It seemed only a matter of time, however, before Federer made the only break, which was enough for the title.
"He played better at the decisive moments and deserved to win in the end," said Seppi, the first Italian to play the final at Halle since the tournament began in 1993. "I'll take some good memories with me."
It's Federer's fourth title of the season after wins at Brisbane, Dubai and Istanbul, and a timely boost for Wimbledon eight days before the tournament begins.
"I think one big secret on grass is when to hit which shot and playing the score the right way," Federer said. "You might be playing perfect but then you take a wrong decision and grass makes you pay for it all."
Federer's only losses in the final at Halle came against Lleyton Hewitt in 2010 and Tommy Haas in 2012.
The 33-year-old is the third player in the Open era to win at least eight titles at a single tournament. Rafael Nadal has nine Roland Garros titles and eight from Monte Carlo and Barcelona, while Guillermo Vilas has eight from Buenos Aires.