Sven Bender and Sokratis Papastathopoulos both missed from the spot for Dortmund and while Bayern's Joshua Kimmich also saw his attempt saved, Die Schwarzgelben could not recover to stop themselves succumbing to yet another major final loss.
It was euphoric relief at the end of a night of frustration for Die Roten as they struggled to break down a stubborn Dortmund rearguard throughout a slow burning affair as Thomas Tuchel followed the tactical blueprint that saw Atletico Madrid shock Bayern in the Champions League.
Guardiola's men dominated the ball and had some half chances with Franck Ribery and Robert Lewandowksi going close, but it was Pierre-Emerick Aubameyang who had the best opportunity of normal time when he blew a glorious opening on the counter attack with just five minutes remaining.
Dortmund had seen captain Mats Hummels leave the pitch through injury and his hopes of lifting the trophy in his last act with the club prior to joining Bayern this summer, were still alive thanks to some magnificent defending from his teammates, until they endured shoot-out woe at the death.
The victory means Guardiola signs off in triumph with a second double in three seasons and he can now look forward to a new adventure in arguably his biggest test in management so far at Manchester City.
Bayern players celebrate winning the penalty shootout of the German Cup (DFB Pokal) final football match Bayern Munich vs Borussia Dortmund at the Olympic stadium in Berlin on May 21, 2016
Image credit: AFP
Does Guardiola leave Bayern as a complete success? The answer to that is 'not quite'. While Bayern have romped to the title in every season under Pep and secured two domestic doubles, they have not managed to win the Champions League. That is essentially what his era will be judged on, particularly as Jupp Heynckes had won the treble just prior to his arrival. If Carlo Ancelotti comes in and masterminds a triumph in Europe's top competition, the passage of time will not recall Guardiola's era so favourably given the Bavarians' total monopoly of the German game. It is expected that they win the league and they continually poach the best talent from their closest rivals, so in that sense Guardiola has achieved the minimum expected.
Sokratis (Borussia Dortmund). A rock for Dortmund despite his spot-kick miss. Didn't deserve to be on the losing side and with him at the heart of the defence, the blow of Hummels' departure in the summer may not be as big as first feared.
43' - DORTMUND CHANCE! Big chance for Bender as a short free-kick routine is nodded down for the midfielder by Lukasz Piszczek but he miscues his volley and it bounces into the turf and into the arms of Neuer.
53' - BAYERN CHANCE! Muller heads it down to Ribery on the left of the area. The Frenchman miscues a volley straight into the path of Lewandowksi who can only stab wide on the stretch from six yards out.
64' - BAYERN CHANCE! Lewandowski smashes a shot from 10 yards over the top after Muller had been denied a clear run at goal by a brilliant last-ditch challenge from Hummels.
76' - BAYERN CHANCE! Ribery slaloms into the area on the left side and flashes in a deflected low shot that Bürki manages to keep out. Great stop.
79' - FAREWELL HUMMELS. The defender is forced off with that injury sustained while stretching to make a tackle. An inauspicious way for his Dortmund career to end. Ginter comes on to replace him.
85' - DORTMUND CHANCE! Piszczek leads the charge down the right and puts it on a plate for Aubameyang who guides a poor effort over the top from eight yards out.
104' - DORTMUND CHANCE! A rare break forward from BVB sees the ball drop for Mkhitaryan on the right of the area but his volley across the face of goal drags agonisingly wide.
114' - GREAT SAVE! Burki does well to keep out Alaba's deflected 20-yard strike.
Bayern Munich for the 18th time in their 21st final.
For the 1st time since 1999 the final was decided on spot kicks.