Dixon sped out of the pits ahead of Vitor Meira on the final round of stops, then held off the Brazilian and hard-luck Marco Andretti to win the first 500 since the two warring open-wheel series came together under the IndyCar banner.
Danica Patrick failed to finish for the first time in four trips to Indy, though it wasn't her fault. She was clipped on pit road by Ryan Briscoe with 29 laps to go, breaking the left rear suspension on a car that had run in the top 10 most of the race but never seriously challenged for the lead. She finished 22nd.
Patrick's mishap was one of numerous crashes and mechanical failures that slowed the race under the yellow caution flag eight times for a total of 69 laps. But Dixon, who started from the pole, clearly had the strongest car on the track.
"There were so many yellows," Dixon said, "it was really hard to get into a rhythm."
Meira, driving for the one-car, low-budget Panther Racing team, has never won an IndyCar race but finished runner-up in the biggest race of all for the second time in four years. He knew he was beaten by the better car.
"It's nice to see the fastest car win," said Meira, who finished 1.75 seconds behind.
Andretti appeared to knock teammate Tony Kanaan out of the race with an aggressive move just past the midway point, but all he got was another close call for a family that is now 1-for-57 at the Brickyard.
The 21-year-old settled for third, while cousin Dixon led 115 of the 200 laps and Chip Ganassi Racing teammate Dan Wheldon was out front for 30 more, backing up the speed they had shown all through the month of May.
"You're clear now," Dixon's spotter screamed over the radio as the 27-year-old New Zealander cleared the last group of lapped cars with two turns to go. "Bring it home! Bring it home!"
For a while, it looked as though an Andretti might finally break through to give the star-crossed family its first Indy victory since grandfather Mario won in 1969. Instead, it was the eighth time Marco, father Michael or Mario finished second or third.
Marco led twice for 15 laps, but the Andretti Green Racing -- co-owned by Michael -- made a crucial miscalculation on its last pit stop. They adjusted the rear wing, looking for more speed, but the No. 26 car wound up falling back in the closing laps after posting the fastest run of the day, more than 224 mph, on lap 161.
"It was a team decision to do what we did," Marco said. "OK, we missed. We messed up as a team. We finished third, got good points. Let's move on."
The race was marred by all sorts of crashes and miscues, two of them while the cars were running under the yellow. That held down the average winning speed to 143.567 mph and took out two of the most prominent drivers in Kanaan and Patrick.
Kanaan was leading on lap 106 when Dixon surged past him right on the backstretch. Andretti dove to the inside, which appeared to catch his teammate off guard. Kanaan drifted high going into the third turn, scraped the outside wall and turned into the path of Sarah Fisher, one of three women in the 33-car field.
Neither was hurt, but both were done for the day. Andretti apologized over the radio for his aggressive move. When told that his youthful teammate was sorry, Kanaan responded, "He'd better be. That was a very stupid move. Me being a good teammate, I didn't want to turn into him and take out two cars. So I give up today."
Kanaan has led 214 laps in his Indy career -- running out front in every one of his seven trips to the Brickyard -- but he's never tasted milk in Victory Lane.
"Every time I lead, something happens," said Kanaan, who finished 29th, the worst of his Indy career.
Of course, it's easy to understand Andretti's eagerness to get to the front at Indy considering his family history.
Mario spent the last quarter century of his career trying to win a second 500, only to be disappointed every time. Michael led more laps than any non-winner in the race's 92-year history. Marco was a straightaway away from winning as a rookie in 2006, only to get passed by Sam Hornish Jr.
So while Marco was sorry to see his teammate crashing out, he didn't spend much time fretting about it.
"Stupid? I don't know about stupid," Andretti said. "Last minute, maybe. I had an awesome run on him. Maybe I dive-bombed him too late. I don't know. I'll have to look at the tape. If so, I completely apologize."
Patrick, who became a national phenomenon when she led late in the race and finished fourth as a rookie in 2005, had hoped to follow her first IndyCar victory, at Japan last month, with a win in the biggest race of all.
But she never made a serious run for the lead, complaining incessantly about an ill-handling car while talking with her crew over the radio. She started fifth but quickly fell back and got no higher than sixth the rest of the day.
"I can't do anything," she screamed during one tirade. "I am sloooooow. I am damn slow."
Any hopes of challenging at the end were ruined by Briscoe's mistake in the pits. The Australian spun his tires trying to get out and slid sideways into Patrick's blue-and-black car, which rolled helplessly to a stop, its day done with a broken suspension.
A frustrated Patrick slammed her steering wheel as she sat motionless along the lane leading back to the track. Then, after being pushed back to the pits, she climbed out of the car, ripped off her gloves and stomped angrily toward Briscoe's Team Penske pits. A track security official cut her off before she could get there.
"Probably best I didn't get down there anyway," Patrick said.
The excitement of having everyone in IndyCar running the same series was reflected in the packed grandstands surrounding the 2 1/2-mile track. They were largely filled after years of declining attendance, the estimated 300,000 fans clearly pumped up about seeing all the top open-wheel stars racing under the same banner.
Also, after a month of rainy weather, there was no threat of showers when the green flag waved.
With 11 rookies -- the most since 1997 -- and nine drivers from teams coming over from the defunct Champ Car series, which gave them little or no experience on ovals, there was plenty of cause for concern.
One of the neophytes, 19-year-old Graham Rahal, was the first to go out, on lap 37. The son of 1986 Indy winner Bobby Rahal was thrown off line by a slowing car and slammed the wall coming out of the fourth turn. He wound up last, hardly the way he envisioned his first race at the track that has mean so much to his family.
"A learning experience," said Bobby Rahal, whose own team finished sixth with Ryan Hunter-Reay behind the wheel.
But the newcomers largely stayed out of trouble. Oriol Servia was 11th, the highest finisher among the former Champ Car drivers, and two others, Will Power and Enrique Bernoldi, were among 15 drivers on the lead lap at the end. Mario Moraes and Bruno Junquiera were still running as well.