Four years after winning his first major in Dortmund, Smith claimed the £150,000 prize to add the European Championship to his World Series of Darts Finals title from September.
After the opening four legs went with throw, Smith won six in a row to establish an 8-2 lead. Schindler responded with a fightback that included checkouts of 116 and 127, but Smith held his nerve to secure the title with his fifth match dart.
"To have this trophy in my hands and to win another major, I’m absolutely over the moon," said Smith.
"I was a little bit nervous going into that last break. Martin wouldn’t let up, would he? Full credit to him.
"I just play the game in front of me. Every game I play is a final, I’m buzzing to have won another major, and that’s for my mum and dad!"
Top seed Smith began his campaign with a 6-4 win over Karel Sedlacek on Thursday before beating Damon Heta 10-7.
He averaged 107 in a 10-6 quarter-final victory over Luke Woodhouse before recovering from 4-1 down to beat Gerwyn Price 11-7 in the semi-finals, maintaining his perfect record in major finals.
Smith became the first top seed to win the European Championship since 2017 and moved up to world number six, taking his tally of major titles to three.
"It’s a strange one. I really don’t think I played great this week," Smith said.
"I had a really good game against Luke Woodhouse; I think a lot of players let me off as well, but sometimes you have to win ugly.
"I’ll keep doing what I’m doing. I’m loving the darts, and I’m enjoying playing in front of amazing crowds like this. They were so respectful. They’ve been absolutely brilliant today!"
Schindler fell short of a maiden major title but enjoyed a landmark run in front of his home crowd, becoming the first German to reach a televised final.
The German number one, who entered the tournament as the 31st seed after securing qualification at the final European Tour event of the year, began his campaign with a deciding-leg victory over second seed Wessel Nijman on Friday.
He then swept aside Jermaine Wattimena 10-4 before producing a dominant display against Jonny Clayton in the quarter-finals, averaging more than 103 in a 10-1 victory.
The former World Youth Championship runner-up followed that performance by beating Krzysztof Ratajski 11-6 in the semi-finals, holding off a late fightback from the Polish number one to reach the final.
The runner-up finish also secured Schindler a place at the Grand Slam of Darts and lifted him to world number 20.
"When I started playing darts 10 years ago, I didn’t expect anything, and now I made a major final," Schindler said.
"I tried everything to win this one, but fair play to Ross; he played well.
"The crowd were always supporting me, and I really appreciate it. Thank you, Dortmund!"
Ratajski also impressed by knocking out world number one Luke Littler to reach his first major semi-final since 2021. The Pole held off a fightback from the world champion to win 10-6.
In the other quarter-final, Price beat Stephen Bunting 10-3, averaging more than 103.
Results
Quarter-finals
Ross Smith 10-6 Luke Woodhouse
Gerwyn Price 10-3 Stephen Bunting
Martin Schindler 10-1 Jonny Clayton
Krzysztof Ratajski 10-6 Luke Littler
Semi-finals
Martin Schindler 11-6 Krzysztof Ratajski
Final
Ross Smith 11-8 Martin Schindler