The all-American final was the first at Masters 1000 level since Andy Roddick beat Mardy Fish in Cincinnati in 2003 and offered an encouraging sign for US men's tennis ahead of the US Open.
The US has not had a men's singles champion at Flushing Meadows since Roddick's triumph that same year.
Shelton arrived in Canada after a frustrating stretch of results, having suffered a first-round exit at Wimbledon, a second-round defeat at Roland Garros and managed just one win across his first four Masters 1000 events of the season.
However, he has rediscovered his best form on the Canadian hard courts.
"To play the way that I've played this week, to go through this draw without dropping a set, I think it speaks a lot to the work that I've been putting in, but it speaks a lot to my mental toughness," Shelton said.
"It hasn't been the best for me, easiest or most straightforward year for me, to put together a performance like this and playing at the top of my game, I have no words."
The No.5 seed took control of the opening set as he repeatedly attacked Nakashima's second serve after the pair traded holds through 3-3.
Shelton broke for 4-3 with a forehand return winner off a second serve and struck again in the final game as Nakashima's forehand began to falter.
Nakashima, playing in his first Masters 1000 final, weathered the pressure in the second set and forced a tiebreak, but Shelton again seized the initiative with a mini-break before closing out the match with a superb forehand winner.
Shelton became the first Canadian Open champion since Novak Djokovic in 2016 to win the tournament without dropping a set, while also becoming the first player since Rafa Nadal in 2019 to successfully defend the title.
