Zhao, 29, was the first Chinese player to be crowned world champion when he beat three-time winner Mark Williams 18-12 in last year's final.
Murphy's victory means the Englishman is now just two wins away from a second world title, 21 years after lifting snooker's most prestigious trophy.
Zhao's defeat meant he became the latest player to succumb to the "curse of the Crucible". No first-time world champion has retained the title the following year since the tournament moved to Sheffield's Crucible Theatre in 1977.
He established an early 3-0 lead only for the 43-year-old Murphy to come back into the best of 25 frames contest.
"Shaun played really well, he gave me big pressure and played perfect snooker today," Zhao told the BBC. "He deserved to win.
"I felt some pressure (as defending champion) but I still felt alright. I tried to get better, but Shaun is a good player and he played very well so congratulations to him."
Zhao added: "I'm looking forward to the new season, I can have a rest now and I'm happy. Hopefully next season I will have a strong comeback."
The players were all square at 8-8 come the end of Tuesday's play but Murphy edged ahead Wednesday with a break of 98.
Zhao hit back with a contribution of 71 before Murphy replied with breaks of 80 and 70 while reeling off the next three frames to leave himself on the verge of victory against a player he labelled the "best on the planet" earlier this week.
A fine 81 from Zhao, snooker's first world champion from Asia, took the match to a 23rd frame.
But Murphy's superb red to the middle pocket led to a break of 69 from the bottom of the pack, with Zhao unable to get the snooker he required to prolong the contest.
"I think when you're playing great players, which Zhao Xintong unquestionably is, it makes it straightforward for you," Murphy said afterwards.
"At 3-0 down, if you'd said I would have been level going into the last session, I'd have snapped your hand off.
"Even though I lost the second session, I was able to get myself in a good headspace for today and I just knew that I had to come out, be somewhere near my best and I think I was."