The Yorkshireman became a first British winner at Burghley since William Fox-Pitt six years ago as he took 10-year-old Ballaghmor Class to victory.
Piggy French and Vanir Kamira jumped clear but Townend held on.
French finished 1.3 penalties behind Townend on 46.9, with reigning British Open champion Gemma Tattersall third.
Tom McEwen completed an all-British four top with Toledo De Kerser.
Despite having one fence down and collecting a time fault, Townend, who helped Great Britain to team gold at last month's European Championships in Poland, held his nerve for another triumph eight years after his first.
"It is a tough job, but I have got so much faith in this horse and I am glad he proved me right," the 34-year-old said.
"We had a showjumping fence down, and sometimes he is still a little bit babyish with the crowds, but this is a very special moment."
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