The Barcelona midfielder, who has been linked with a summer switch to Manchester United, netted three times - with his head, left foot and right foot - in a pulsating opening 45 minutes as Spain successfully defended their Under-21 crown.
With the senior side the reigning European champions and World Cup holders, it appears the Iberian nation can look forward to dominating the global game for many years to come.
There were just six minutes on the clock when Julen Lopetegui's side forged ahead as Isco's pass sent Alvaro Morata jinking towards the touchline and his precision cross was headed home by an unmarked Thiago from the centre of the six-yard box.
However, Italy responded immediately with a searching ball out of defence from Giulio Donati superbly brought down by Ciro Immobile's first touch, with the striker's second lifting it over the head of the advancing David de Gea.
Francesco Bardi was called into action three times to keep the scores level, denying Morata twice and then getting down well to keep out Koke's clever flick through his legs from Crisian Tello's low cross, while De Gea was in the right place at the right time to deny Allesandro Florenzi after a piece of skill reminiscent of Paul Gascoigne's Euro 96 goal for England against Scotland.
But the Azzurrini goalkeeper was helpless when Koke's excellent ball into the box found Thiago in space between two defenders, with his left-foot drive after chesting down having too much power for the Italy No.1.
And it was 3-1 to Spain before the interval with Donati penalised as he slid in on Tello, with Thiago taking responsibility from the penalty spot and firing straight down the middle with his right foot to complete the perfect treble.
Bardi had to be alert to deny Thiago a fourth in the opening moments of the second half before Italy had a rare sight of goal, only for Florenzi to fire over the bar when the ball dropped to him in the box.
Isco was inches away from extending Spain's lead in the 54th minute as he side-footed just past the post with a first-time effort from outside the box following Tello's run and pull-back, before play switched to the other end and semi-final hero Fabio Borini could not test De Gea.
Spain effectively sealed victory with their second penalty of the evening in the 64th minute, with Isco handed the responsibility this time and calmly sending Bardi the wrong way after full-back Martin Monotya was brought down by Vasco Regini as he cut back inside.
Liverpool striker Borini did get his name on the scoresheet with 10 minutes remaining as he played a neat one-two with Lorenzo Insigne before unleashing a low drive from outside the box which curved away from Manchester United's De Gea and into the bottom corner of the net.