In the first all-German Halle final since the Wimbledon warm-up event started 19 years ago, the pair slugged it out in an exciting first set before the 27-year-old Petzschner retired, trailing 7-6 2-0.
World No 49 Kohlschreiber, who beat holder Lleyton Hewitt in the last eight and world No 8 Gael Monfils in the semi-finals, landed his first singles title since Auckland in 2008.
"It does not really feel like a title win," Kohlschreiber told reporters. "It is a bit of a shame given that we had a really good fight in the first set. Now it kind of feels strange."
Kohlschreiber, who has slipped down the rankings after a mediocre start to the season, clinched the opening set when world No 71 Petzschner sank a slice backhand into the net.
Petzschner, who won the Wimbledon doubles title last year, had medical treatment after the first set but started feeling more pain in his back early in the second set, pulling out after just two games to hand the title to his rival.
"At 5-5 in the first set I hurt something in my lower back. Then it started hurting more and more," explained Petzschner.
"But me retiring should not take anything away from Philipp's victory. He played a great tournament."