Three-time grand slam champion Murray had rolled back the years to reach his first ATP Tour championship match since beating Stan Wawrinka in Antwerp back in October 2019.
There was to be no 47th ATP Tour singles title for the Briton at Ken Rosewall Arena, though, as Karatsev won 6-3 6-3 to ensure he will start the Australian Open next week with a spring in his step.
The world No.20 from Russia was a surprise semi-finalist in the first grand slam of the year at Melbourne Park last year and looks capable of making his presence felt again.
Karatsev struck 27 winners to 13 from the racket of former world number one Murray, who was unable to break the Vladikavkaz native's serve.
Murray failed to hold in the first game of the final and the opening set was over when he was broken for a second time.
Karatsev surged into a 3-0 lead in the second set and fended off five break points before finally holding to take a 4-1 lead, then went on to serve it out as he secured a third ATP Tour singles title, having been triumphant in Moscow and Dubai last year.
Murray will take great heart from the strides he has made this week and three years after fearing he may be force to retire at the Australian Open, the 34-year-old will face Nikoloz Basilashvili in the first round of the 2022 tournament next week.
Karatsev will do battle with Spaniard Jaume Munar for a place in the second round at Melbourne Park.