La Celeste hit Gerardo Martino's side with a first half double salvo, courtesy of strikers Luis Suarez and Diego Forlan. The Atletico Madrid man completed his brace moments before the final whistle to ensure Uruguay's triumph for a record 15th time, one ahead now of their bitter rivals Argentina.
Oscar Tabarez' men made their intentions know right from the start as shortly after the first whistle Suarez nearly forced a goal with a shot from inside the six-yard box, but the ball hit the side-netting.
Controversy ensued moments later when Diego Lugano powered a header from inside the penalty area, and Nestor Ortigoza allegedly stopped the ball with his hand, evoking protests from la Celeste.
Justice was served in the 11th minute when Suarez made his way down the right flank and unleashed a stinging shot, which deflected off Dario Veron before crawling into the left corner and past the goal line.
The game became scrappy as emotions were getting the better of the players. In the space of 18 minutes the referee showed no less than four yellow cards in an effort to prevent further offence from both teams.
Uruguay got a wonderful chance to make it two near the half-hour mark when Suarez released Forlan with an excellent through-ball, but the Atletico Madrid striker was denied by Justo Villar.
Minutes before half-time Uruguay made it two, and were already seeing themselves lifting the trophy. Egidio Arevalo stole a ball in midfield, and found the unmarked Forlan, who made no mistake this time as he powered a scintillating finish in the right corner to double la Celeste's lead.
Paraguay tried to claw a goal back after the restart, but were struggling to bypass Uruguay's resilient defence and midfield.
Gerardo Martino's men were leaving a lot of open space, and la Celeste nearly capitalize in the 55th minute, when Suarez threaded a pass for Forlan near the penalty spot, but Veron made a vital interception and deflected the ball.
Just before the hour mark Paraguay went really close to scoring when Nelson Valdez powered a shot against the bar from outside the box.
The Hercules man had another chance moments later when Cristian Riveros found him with a very good ball from the right wing, but the striker failed to convert from close range.
Substitute Edison Cavani forced a wonder save from Villar with 11 minutes to the final whistle as Oscar Tabarez' men were growing increasingly dangerous on the counter.
Forlan completed his brace with a superb finish in injury time, following a pass from Suarez, to seal Uruguay record 15th Copa America and send la Celeste's fans into raptures.