Karlovic's exploits took him to a 5-2 advantage in the tie-break but the 39-year-old twice lost his serve at 4-5 and ended up conceding the set and the match to give Kevin Anderson his first ATP 250 title since last year's New York Open.
Ivo Karlovic is the oldest player since 1977 to make a tour-level final.
Anderson, of South Africa, lost last year's final against Gilles Simon but defeated the Frenchman in straight sets on Friday in the semifinals. What you are doing is truly inspirational.
"It was really close, it could have gone either way".
Karlovic, who turns 40 next month, follows in the footsteps of Australian legend Ken Rosewall who reached a tour-level final aged 43 at the Sydney Indoor tournament in 1977. Great to see you playing this kind of tennis.
Anderson beat world number two Rafael Nadal 4-6, 6-3, 6-4 en route to the final against Djokovic. The action on the men's side began with ATP 250 tournaments in Brisbane, Doha and Pune, all with very different time-zones, which meant that tennis was on display for nearly 20 hours a day for most of the week.
In the third set, after battling for 11 more games, which went on serve, Anderson had a chance to finish the match in the 12th when Karlovic faced two match points but the Croat saved both and another tie-breaker was required to decide the victor. "And I am able to do this here is unbelievable", Karlovic said after the win at the hard court event.
The third was a grind as both men mostly employed serve & volley tactics as the match was kept on serve as there was a number of aces and service winners, and the final headed to a deciding third set tie-break to crown a champion. The big-serving Croat fought past Belgian veteran Steve Darcis 7-6 (3), 4-6, 6-3.
Karlovic would jump in case of victory at 58 in the world rankings.