Just a week after retaining his Olympic title in Rio, Briton Murray, 29, lost in an hour and 34 minutes to 27-year-old Croat Cilic.
World number two Murray was attempting to secure his third Cincinnati Masters title, after wins in 2008 and 2011.
Victory brought Cilic his first title of 2016 and third since 2014’s US Open.
Murray, whose 50th win of the year had come in the semi-final against Milos Raonic, was broken twice in the first set and, despite breaking back, fell behind.
The second set was a close affair, with Murray broken only in game 11, after saving four break points, and Cilic serving out the match.
It was Cilic’s third win in 14 attempts against Murray, who will now look to repeat his 2012 US Open title when the year’s final Grand Slam starts on 29 August.
Murray’s previous defeat came against world number one Novak Djokovic in the final of the French Open in June.
Following that he won the Aegon Championships and Wimbledon before his gruelling four-hour victory over Juan Martin del Potro in the Olympic final.