Smith, who beat Michael van Gerwen in a high-class final to take the world crown last week, appeared in cruise control of Friday’s first-to-eight-legs showpiece after he raced into a 7-3 lead against Price.
But Welshman Price, who is still considering whether he will return to the World Championship stage after he was singled out by the raucous Alexandra Palace crowd, took the next three legs.
Smith began the 14th leg by firing in a 180, allowing him two visits from 142 to claim the title.
However, the world number one left the door ajar for Price to force a decider after he missed two match darts when he needed 52 to win.
Price required 97, but the Iceman could not find a checkout, with Smith – who earlier beat Dimitri Van den Bergh and then Raymond van Barneveld en route to the final – stumbling over the finish line to take the spoils 8-6.
“I am riding a nice wave at the minute, and hopefully it continues,” said Smith. “It was far from perfect tonight but I have to take my chances when they come my way.
“I dug deep, didn’t have the best leg, but thankfully Gez missed [his chance] and I took the double five to win. I have to take the rough with the smooth and keep riding this wave.”
Price, who appeared to be subjected to some boos in Bahrain, added: “Fair play to the crowd. They have been fantastic all weekend and supported everyone and it is nice to come away and get some cheers.
“I know there are a few English fans in there but you have been really good so thank you.”
The Welshman continued: “I didn’t come halfway round the world to lose. I am here to win. I missed a couple of doubles and I will kick myself over that.
“I didn’t perform in the final. Michael took his chances and fair play to him for that because that is what champions do.”