Garcia missed a four-foot putt on the par-5 No. 18 during the fifth extra hole, handing Larrazabal the title, the second of his career and first since 2008.
Both golfers earned tickets into next week's British Open with their performances.
Extra play was necessitated at Golfclub Munchen Eichenried after both finished regulation at 16-under 272. After playing the 18th twice, followed by a pair of par-3s on the 12th and 17th, Larrazabal and Garcia returned to the 18th for the fourth time Sunday.
The match was decided when Garcia's short putt for a birdie lipped out, allowing Larrazabal to easily make his own birdie for the win.
Garcia's 2 1/2-year streak without a European Tour title continued after blowing a two-stroke lead Sunday.
Retief Goosen (2-under 70), Mark Foster (72), Scott Jamieson (64), Joost Luiten (67) and George Coetzee (70) all finished two behind the leaders at 14-under.