The Treble winners had to fight back from falling behind to a Youssef En-Nesyri first half header before man of the match Cole Palmer drew City level with a superb second half header.
Ederson made a number of key saves for City while Nathan Ake was twice denied by fine blocks from the Sevilla keeper.
That set the scene for a nerve-shredding penalty shootout which was ultimately settled with Nemanja Gudelj seeing his fifth kick for Sevilla strike the bar and go over.
It saw City secure our 15th major trophy under Guardiola with the boss creating history by becoming the first manager to win the Super Cup with three different clubs, Barcelona, Bayern Munich and now City.
It was also Pep’s fourth European Super Cup, equalling Carlo Ancelotti as the manager with most titles in this competition.
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“I’m proud. A lot. We knew it from moments earlier in the season and the quality of opponent,” Guardiola said afterwards.
“We were lucky because Eddy, like in the final moments of the Champions League final, saved us in the right moments.
“In general, the game was really good, though we played better in the last 30 minutes of the second half.
“One week ago we lost to penalties (against Arsenal in the Community Shield) today we won it.
“Sevilla have experienced internationals an exceptional keeper, full backs, quality up front, they play so direct and play the ball quick up front and they are really good at doing this.
“But in general, after conceding the goal we played well and for the last 30 minutes in particular.
“It was like the final against Inter a tight game, in that period football is like a coin.
“We could have scored before the penalty kicks but tomorrow we will be even more happier than today.
“We are really delighted to have this title. Now in December we have the chance to win the Club World Cup.”
