The Leopard Trek rider finished eight seconds ahead of a tight pack, with Garmin Cervelo's Daniel Martin in second place and Katusha's Joaquin Rodriguez in third. Liquigas's Ivan Basso was fourth.
Zaugg completed the the 241km course from Milan to Lecco in six hours, 20 minutes and 20 seconds to record his first victory in eight years of professional cycling.
The 30-year-old Zaugg pulled away on the approach to the final summit of the Villa Vergano and held on to win the last major race of the season.
"It was a great victory, it's my eighth year as a professional," Zaugg said. "The last kilometers were very hard, I saw that yesterday.
"I always intended to escape on the last climb and it worked." Zaugg also becomes the first Swiss rider to win the Giro di Lombardia since Oscar Camenzind in 1998.
Liquigas rider Vincenzo Nibali had looked on course for a first win of the season thanks to a stunning break at the base of the Madonna del Ghisallo with 53km to go.
But the Italian, who at one point had held a lead of one minute and 48 seconds, was caught 16km from the finish.
"Us Liquigas riders rode the course in the right way from the morning, we were really strong," Nibali said. "I really believed I could do it on the Ghisallo, I gave everything, Ivan (Basso) did his part, it's a shame because it could have gone a different way.
"In hindsight perhaps I could have waited for the last climb. But I can only say that with hindsight." Pre-race favorite Philippe Gilbert, who was seeking a third successive Giro di Lombardia victory, saw a disappointing end to his Omega Pharma-Lotto career as he finished in eighth place.
