He came home first ahead of compatriot Jonathan Guilmette with Rusty Smith of the United States finishing third.
Gagnon, who took the bronze medal in the 1,500m, finished in a time of 41.802 seconds.
The Canadian was among the favourites but his path to gold was eased considerably in the heats.
South Korean favourite Kim Dong-Sung failed to qualify after finishing third, by a toe, in his semi-final and returns home without a medal.
And America's Apolo Anton Ohno was disqualified from the second semi-final for impeding.
Gagnon has been one of the dominat figures in short track for a decade.
He was a relay gold medallist at the last Olympics in 1998 and a bronze medallist in the 1,000m in 1994.
He has also claimed the overall title at the world championships on four occasions and decided to make a comeback for the Olympics.
"You have to find a dream to work for, that's what I did," the 26-year-old said after winning his first individual Olympic gold.
"I felt I wasn't finished in short track speed skating. That's why I came back.
"I worked for three years for this. It's the end of a journey - I just can't believe it."
Ohno's disqualification came days after he benefitted from such a decision to win gold in the 1,500m.
The American appeared to push off Satoru Terao going into a bend which sent the Japanese skater skidding off the track.
"I tried to set up the Japanese skater on the inside," explained Ohno.
"I tried to hold the track and ran out of room."