The Northern Irishman entered the final day at Vallda Golf and Country Club three shots off the lead but carded a stunning closing 64 to get to 17 under and set the target.
Spaniard Adrian Otaegui had a chance to win it on the last but three putted the 18th for the only bogey of his 67 to sit a shot off the lead.
In a week where the European Tour broke new ground with a field of 78 men and 78 women playing over the same course for the same trophy, England's Alice Hewson carded a closing 69 to finish third at 15 under, two shots clear of Australian Scott Hend and England's James Morrison.
It has been a long road to the winner's circle for Caldwell, who first came through the Qualifying School in 2008 but since then had played just 47 events on the European Tour coming into this week.
He worked in a local golf shop during some of his time on the EuroPro Tour - where he claimed wins in 2016 and 2017 - and made his way back to the European Tour via the Qualifying School in 2019 after a decade away.
But he will now have no worries about his playing privileges for the foreseeable future, and cut an emotional figure as he was interviewed after his victory.
“It’s been a dream of mine for an awful long time,” he said. “A lot of hard work goes into it. It hasn’t quite sunk in yet, but hopefully more to come.
“In 2009 I played my first year, lost my card, played mini tours and Challenge Tour over the years, worked as well in a local golf store. It’s been a long road but finally I’m here.
"The golf club at home will probably be going bonkers so just put a tab on and crack on boys and enjoy.
"My parents have been with me the whole way so I look forward to talking to them tonight."
On a groundbreaking week in golf, Caldwell added: "It's been a tremendous week, I think what they've done this week is fantastic and I hope we have more weeks like this. The golf course was fantastic and I played with some great girls this week.
"I got a fist pump from Annika (Sorenstam) when I came off 18 which is pretty incredible - probably the greatest ever ladies golfer so that was pretty special."
Otaegui two putted the par five fourth and then put a stunning tee shot to three feet at the fifth to hit the front but he soon had company.
Caldwell had holed from 16 feet on the third and then made a pair of two putt birdies on the fourth and sixth before a 35 footer on the eighth had him in a share.
Otaegui made two putts from off the green at sixth to hit the front but Caldwell made the most of the par five tenth with two putts and then holed from 15 feet on the 11th.
The par fives were proving absolutely key and Otaegui made his birdie at the tenth to get back into a tie but Caldwell drove the 14th and rolled home from 40 feet for an eagle and a two shot lead.
Caldwell dropped a shot on the 15th after being plugged but reclaimed his cushion as he got up and down on the par five 16th.
He then missed a short putt on the 17th and Otaegui joined him at the top as he drove to the side of the 14th and got up and down.
Otaegui briefly took the solo lead with yet another two putt birdie on the 16th but ahead on the last, Caldwell played a remarkable second from some nasty stuff down the right to three feet and was left to wait at 17 under.
He must have feared the worst when Otaegui was inside 20 feet with his approach to the 18th but the 28-year-old ran his birdie attempt four feet past and then missed coming back to hand Caldwell the title.
Hewson was clinging on to the leaders after four birdies and four bogeys in her opening 12 holes but she holed from around 15 feet on the 13th and 14th and then hit the green in two on the 16th and claimed her birdie to storm up the leaderboard.
Hend and Morrison both carded rounds of 70 to finish a shot ahead of Dane Joachim B. Hansen and two clear of Australian Jason Scrivener - who had led by two at one point on Sunday but stumbled on the back nine in a round of 73 - home favourite Alexander Björk and Japan's Masahiro Kawamura.