After defending champion Schauffele birdied the par-five 18th of the final round to tie in regulation, McIlroy prevailed in sudden death.
He struck a towering four-iron from 225 yards to within 20 feet of the pin to set up a two-putt birdie that Schauffele, whose drive had ended in the rough, could not match with his 10-foot birdie opportunity.
McIlroy carded a four-under-par 68 in an exciting final round at Sheshan International, while Schauffele had a 66 in what turned into a battle royale in front of a massive gallery at Sheshan International.
The pair finished at 19-under-par 269, two shots ahead of South African Louis Oosthuizen.
McIlroy was perhaps fortunate even to be in a playoff after a poor drive at the final hole of regulation drifted perilously close to the water hazard lining the right side of the fairway.
"I got lucky in regulation not to go in the water and then it was a relief to hit those two shots in the playoff," he said after securing his fourth win of the year.
Following that reprieve, he made amends in the playoff, saying he focused on a target for his approach shot and blocked the significance of the occasion from his mind.
"It was a perfect (yardage) for a four-iron back into the wind a little bit. You've got to take everything else out of the equation and just hit the shot."
The victory was the 26th worldwide by McIlroy, a total that includes four majors.
He has now also won three of the four events that comprise the World Golf Championships series, with only the Mexico Championship, where he came second this year, missing from his resume.
McIlroy will remain ranked second in the world behind Brooks Koepka, who missed the event due to a knee injury. The European Tour's season-ending DP World Tour Championship in Dubai, from Nov. 21-24, is McIlroy's last remaining event this year.
(Reporting by Andrew Both in Tokyo; Editing by Simon Cameron-Moore and Gerry Doyle)