LISBON, October 13, 2013 (AFP) - Lynn, who started the final round on the Algarve six shots off the pace, carded a final round 63 for an 18 under par total of 266, with Walters a shot further back.
Overnight leader Paul Waring of England shared third place on 268 with compatriot Stephen Gallacher and Austria's Bernd Wiesberger.
Lynn, a former USPGA Championship runner-up, won his only other European Tour title at the Dutch Open in 2004.
He built his victory charge on Sunday on a run of five birdies in a front nine of 30 and, after a bogey at the 10th, picked up further shots at the 11th, 14th, 15th and 17th to set a clubhouse target that was never matched.
"I really caught fire on the front nine, I was making everything I looked at, although I hit it to one foot at the first which got me off to a really good start," said Lynn, who looked out of contention on Saturday following a third round 73.
"After that I made a couple of great putts for par to keep the momentum going and then I was making the birdie putts."
An emotional Walters holed a 40 foot par putt on the 18th to claim second place on 17 under, the South African breaking down in tears following the death of his mother two weeks ago.
"I don't know if I can talk much right now," said the 32-year-old from Johannesburg.
"Coming into the week I really didn't have any goals or ambitions, I just wanted to play and honour my mum and make her proud.
"The putts kept dropping and I kept hitting some decent shots and the last one at the end, she made it for sure. It was probably the best moment of my career. It was so cool because I had a lot on the line.
"I don't think I have the words for it just yet. Maybe after a drink with my dad who is here with me we can fully take it all in, but at first glance I don't know how I did it."
Leading final round scores in the Portugal Masters at the Oceanico Victoria Golf Course, Algarve, Portugal, on Sunday (GBR/IRL unless stated, par 71):
266 - David Lynn 65 65 73 63
267 - Justin Walters (RSA) 69 63 69 66
268 - Stephen Gallacher 70 67 65 66, Paul Waring 67 63 67 71, Bernd Wiesberger (AUT) 66 65 70 67
269 - Hennie Otto (RSA) 66 64 69 70, Jamie Donaldson 65 68 66 70
270 - Robert Jan Derksen (NED) 69 68 67 66, Ross Fisher 67 66 71 66, Simon
Thornton 65 69 65 71, Pablo Larrazabal (ESP) 69 67 64 70, Christopher Doak 67 64 69 70
271 - Martin Kaymer (GER) 68 68 68 67, Scott Jamieson 66 73 60 72
272 - Nicolas Colsaerts (BEL) 68 67 67 70, Matthew Baldwin 67 66 69 70
273 - Francesco Molinari (ITA) 68 72 63 70, Anthony Wall 68 68 69 68, Marcel Siem (GER) 66 72 69 66, Richard Green (AUS) 71 69 68 65, Victor Dubuisson (FRA) 67 67 72 67
274 - Soren Hansen (DEN) 66 72 70 66, Alvaro Quiros (ESP) 65 67 68 74, Fredrik Andersson Hed (SWE) 67 71 68 68, Lee Slattery 71 66 70 67
Selected
276 - Thomas Aiken (RSA) 71 69 70 66, Paul Lawrie 69 66 73 68
277 - Garth Mulroy (RSA) 70 69 68 70, Jaco Van Zyl (RSA) 69 67 74 68, Paul McGinley 71 66 71 70
279 - Miguel Angel Jimenez (ESP) 71 69 69 70, Thomas Bjorn (DEN) 74 63 72 70
280 - Andrew Dodt (AUS) 72 66 69 73