TURIN, Italy, Sept 16, 2012 (AFP) - The 31-year-old Spaniard, who was winning his sixth EPGA title and first since Singapore in November last year, shot a superb eight-under-par 64 in the final round to finish on 24 under for the tournament.
Mulroy was level with the winner with two holes remaining but ended up on 22 under par, shooting a final round of 67.
"It felt like match play out there and I'm delighted to have come out on top," said Fernandez-Castano, who previously won the event in 2007.
"It feels very special to win this tournament again. I knew it would have to be a low round to win today and so it proved. The putts were going in today."
The pair had fought out a thrilling duel over the majority of the final round after Belgian Ryder Cup debutant Nicolas Colsaerts' early challenge which saw him briefly hold the lead had petered out.
Mulroy, 34, and with just one win on the EPGA Tour, at the Alfred Dunhill Championship last year, had at one point held a two-shot lead only for the Spaniard to enjoy a purple patch around the turn with four successive birdies to pass him.
However, back came the resilient South African as he rattled off three birdies of his own from the 12th-14th, which his opponent was only able to reply with two of his own.
Mulroy's nerve, though, failed him when it came to the business end of the round as he bogeyed the 17th while Fernandez-Castano parred it and then on the par five 18th the South African could only par it while his rival birdied.
Selected final round scores in the EPGA Italian Open here on Sunday (GBR and IRL unless stated - par 72):
264 - Gonzalo Fernandez-Castano (ESP) 68-65-67-64
266 - Garth Mulroy (RSA) 66-67-66-67
268 - Matteo Manassero (ITA) 69-69-65-65, Gregory Bourdy (FRA) 69-64-70-65
270 - Gary Boyd 69-70-68-63, Nicolas Colsaerts (BEL) 71-67-65-67, Martin Kaymer (GER) 70-66-67-67, Pablo Larrazabal (ESP) 69-66-66-69
271 - Rafael Cabrera Bello (ESP) 67-69-65-70
272 - Anders Hansen (DEN) 70-68-67-67, Marc Warren 68-65-72-67, Jaco Van Zyl (RSA) 71-69-68-64
273 - Shane Lowry 70-67-67-69, Keith Horne (RSA) 66-71-68-68, Victor Dubuisson (FRA) 66-69-69-69, Sam Little 67-68-69-69
274 - Richard Bland 66-66-71-71, Mikael Lundberg (SWE) 70-65-71-68, Sam Walker 70-69-68-67, David Howell 66-70-72-66, Bradley Dredge 67-69-70-68
275 - Emiliano Grillo (ARG) 68-70-67-70, Hennie Otto (RSA) 70-67-67-71, Joel Sjoholm (SWE) 64-71-69-71, Tommy Fleetwood 69-69-69-68, Michael Hoey 71-67-72-65
Selected
277 - Shiv Kapur (IND) 67-69-70-71
278 - Francesco Molinari (ITA) 68-69-76-65, Dylan Frittelli (RSA) 70-67-70-71, Richard Sterne (RSA) 67-68-71-72
279 - Thomas Aiken (RSA) 70-67-69-73
281 - Jose-Maria Olazabal (ESP) 70-70-76-65
282 - Todd Hamilton (USA) 73-67-72-70, Darren Fichardt (RSA) 69-67-75-71
284 - Shaun Micheel (USA) 71-68-71-74