The German wild card entrant, who lost to compatriot Angelique Kerber in last year's final in Stuttgart, held on to win her second career title after Mladenovic had rallied in the second set.
"It's unbelievable. I'm a bit perplexed now. I think tonight will be the party of the year," said the 29-year-old Siegemund, who received enthusiastic support from the 4,500 spectators. "It was an unbelievable match. I don't know how I did it."
Siegemund stormed into a 4-0 lead before Mladenovic broke in turn. But the French player failed to hold serve at all in the first set, which Siegemund wrapped up in 29 minutes.
Mladenovic improved drastically in the second, holding serve and converting both break opportunities, while Siegemund made 11 unforced errors. German finished with 29 altogether while Mladenovic had 32.
Mladenovic, who ended Maria Sharapova's return from her doping ban on Saturday and Kerber's defense on Thursday, was going for her second title of 2017.