The Porcupine Warriors relied on goalkeeper Ibrahim Danlad, who produced two crucial saves in the shootout to help Kotoko secure their second Democracy Cup title.
The third edition of the Democracy Cup once again brought Ghana's two biggest clubs together, with the fixture serving as part of Parliament's commemoration of 32 years of parliamentary democracy in Ghana.
The Ghana Football Association had approved the encounter, which was staged in Kumasi on August 28.
Neither side was able to break the deadlock during normal time in a tense contest between the traditional rivals.
Kotoko created some of the clearer opportunities, but Hearts goalkeeper Benjamin Asare produced important saves to keep his side in the contest.
At the other end, Danlad was also called upon to keep Hearts from finding a breakthrough.
With the match ending 0-0 after 90 minutes, the trophy had to be decided from the penalty spot.
That was where Danlad, who has rejoined the club, made the difference.
The Kotoko goalkeeper saved two Hearts penalties, allowing the Porcupine Warriors to convert four of their own attempts and complete a 4-1 victory in the shootout.
The victory gives Kotoko their second Democracy Cup title, having also won the inaugural edition in 2024 when they defeated Hearts of Oak 2-1.
The trophy also represents the first piece of silverware in Ghana for Kotoko coach Eric Tinkler, who guided the Kumasi-based club to the victory.
Beyond the domestic bragging rights, Kotoko's victory also comes with an international opportunity. The champions are set to travel to the the United Kingdom for a friendly game.
