Returning to grass in his favorite warm-up for Wimbledon, the top-seeded Federer looked lethargic until the middle of the second set against a player he had never lost to in 14 previous matches. It was the first final on the tour this year involving two players 30 or older.
The 31-year-old Federer won his first title since Cincinnati in August and his sixth in Halle, the first since 2008. Four of Federer's seven Wimbledon titles have come after victories in Halle.
"I've won a lot but not so much in the last 10 months, although I feel I'd been playing well," Federer said. "But the others were playing better."
The former top-ranked player, who is now No. 3, won his 77th career title.
Federer will be looking to extend his record of 17 Grand Slam championships when he defends his title at Wimbledon.
With Federer starting to hit shots with confidence, the turning point of the match came in the eighth game of the second set, when Youzhny double-faulted on break point. The Swiss star then hit a perfect backhand passing shot to go up 4-3 in the third set. He held for 5-3 with a smash and fired a service winner to seal his victory after just over 2 hours.
Federer has a big following at the Halle tournament and has a street named after him next to the stadium. The fans gave him a standing ovation, while his wife, Mirka, let out a sigh of relief while keeping an eye on their twin daughters.
"The difference was that he was better today -- he's been better all his life," the 30-year-old Youzhny said.
Federer finished with 12 aces.
"The first set was very close; it could have gone either way. I had to fight very hard to stay in the second. My serve saved me today," Federer said. "At the end I was just a bit steadier."