Sinner, 24, retained his crown on the London grass against Zverev - who had won his first Grand Slam title at the French Open just weeks earlier - 6-7(7), 7-6(2), 6-3, 6-4.
The 29-year-old German moves up one spot to push Spain's Carlos Alcaraz down to third.
Spaniard Alcaraz was a finalist against Sinner at Wimbledon last year but was unable to compete with a wrist injury that also forced him to withdraw from Roland Garros.
Veteran Serb Novak Djokovic, 39, who fell to Sinner in the Wimbledon semi-finals, climbed one place to seventh.
Britain's Arthur Fery leapt 78 places from 114th to 36th after the wildcard's run to the semi-finals, where he lost to Zverev.
"It's going to change things, for sure," Fery, 24, said.
"I'm going to be able to play Tour events at least for a full year, hopefully for more. It's going to be interesting to see how I deal with that change and everything that brings in terms of expectations."
Noskova into top 10
Czech Linda Noskova moved into the WTA top 10 after winning her first Grand Slam title at Wimbledon at the weekend.
The 21-year-old jumps five places to a career-high number seven ranking just behind compatriot Karolina Muchova, whom she beat in the final at the All England Club on Saturday.
Noskova won her third WTA title and first major in astonishing style, recovering from wasting five match points in the second set to beat Muchova 6-2, 5-7, 6-3 in London.
Aryna Sabalenka, who crashed out of Wimbledon in the last 16 to Japan's Naomi Osaka, remains world number one ahead of Kazakh Elena Rybakina, who fell in the third round to Belgian Elise Mertens.
American Jessica Pegula, a quarter-finalist at Wimbledon, moves up one place to third, ahead of compatriot Coco Gauff, who jumps three places to fourth after her run to the semi-final in London.