Two goals from Ben Sheaf and Yassin Fortune on either side of the half were enough to give the Young Gunners victory in their maiden appearance at the tournament.
Arsenal could have taken the lead as early as the 18th minute but Gedion Zelalem saw his spot kick brilliantly saved by Mike van de Meulenhof in the PSV goals.
The London side made their high ball possession count when Fortune fired a long-range cracker in the 25th minute which gave Van de Meulenhof no chance this time.
Rigo Dante came off the bench to restore parity in the 66th minute.
With the match seemingly heading for a penalty shootout (as no extra time was to be played), Sheaf had other ideas and struck a killer blow with one minute of regulation time remaining to break the hearts of the PSV side that had come back strongly in the closing stages of the match.
It was another well-worked goal from Arsenal as Sheaf dribbled past defenders and coolly beat the advancing keeper.
It was his third goal of the tournament to leave him joint top goal scorer with Muhammed Yesilyurt of Galatasary.
Sheaf was also named Player of the Tournament.
Earlier in the day the South African U19 team beat VFB Stuttgart of Germany 2-0 to claim bronze in the third/fourth place playoff.
Masilake Phohlongo and Keletso Makgalwa scored in the 34th and 63rd minutes respectively for South Africa, with the latter being named Man of the Match.
The other teams that took part in the tournament were the KwaZulu-Natal Academy Team, Galatasary (Turkey), AC Milan (Italy), and Celtic (Scotland).