The match ended 1-1 after extra time as Atletico, giving their usual never-say-die performance, conceded an early goal, missed a penalty, clung on by the skin of their teeth and then found the strength to equalise at the San Siro.
But it was all in vain as Juanfran struck their fourth penalty against the post, allowing a previously subdued Ronaldo to stride up and coolly blast home the decisive penalty for a 5-3 shootout win -- his third European Cup success.
Real's former playmaker Zinedine Zidane was left to celebrate winning Europe's elite club competition five months after starting his first coaching job and become the seventh man to claim the trophy as both a player and a manager.
The latter was also against Real when Sergio Ramos scored in stoppage time to set his side up for a 4-1 extra-time win.
This time, Ramos gave Real a 15th minute lead but, after Antoine Griezmann missed a penalty for Atletico at the start of the second half, the Mattress Makers hit back with a superbly-taken equaliser by substitute Yannick Carrasco.
Just reward
Real captain Ramos, who converted their fourth penalty, said the title was "just reward" for their hard work. “We knew that it was a unique chance to make history and after an up and down season it is a reward," he said.
Match-winner Ronaldo added: "The penalties are always a lottery, you never know what will happen, but our team showed more experience and we showed it by scoring all the penalties. A fantastic night for us."
Atletico's shattered coach Simeone added: "It hurts to see the people who paid for the tickets and I couldn't give them what they wanted. That hurts more than anything else.
"I'm proud of my players, they've made an extraordinary effort, to beat Barcelona and Bayern Munich (in earlier rounds). The effort was really tremendous."
They showed their intentions with some heavy tackles early on but their plan threatened to unravel when a heavy challenge by Gabi led to a free kick which was floated in by Toni Kroos and headed on by Gareth Bale for Ramos to bundle home.
Real looked supremely confident and there was some premature showboating, but Atletico, initially uncomfortable at having to chase the game, forced their way back into the match.
Dramatic escapes
A breathless spell followed as Atletico, leaving gaps at the back, had a series of dramatic escapes.
Karim Benzema had the chance to settle it for Real when he broke clear down the right but Atletico keeper Jan Oblak judged the situation perfectly and blocked the Frenchman's shot.
Atletico immediately went down the other end where Griezmann lifted the ball to Juanfran, who volleyed the ball across the area for Carrasco to fire home from close range.
That could have been the turning point, but instead Atletico ran out of steam.
The pace of the match slowed and neither side really looked like winning it in extra time, with Ronaldo looking short of full-fitness but with Zidane having already used up his three substitutes.
The first seven penalties were all converted until the hapless Juanfran saw his effort hit the post, leaving the way for Ronaldo to win another European title for his side.