Tsukasa Shiotani scored a consolation goal for the Emirati side four minutes before the final whistle, and an own goal by Yahia Nader sealed the result in stoppage time.
Recently crowned Ballon d'Or victor Modric took one touch before thumping the ball into the bottom corner from outside the box to break the deadlock in the 14th minute after Al Ain had missed two early chances to take a shock lead.
Al Ain then went on to beat African champions Esperance de Tunis 3-0 and South American champions River Plate 5-4 on penalties in the semifinals to set up the glamour showdown with Real Madrid.
Al-Ain came out boldly and almost took the lead in the early going when an amateurish clearance by Brazilian defender Marcelo gave Hussein el-Shahat a golden chance to score.
Hasenhuttl's impact shows as spirited Southampton stun Arsenal
The north London side slumped to their first defeat in the Premier League since August on Sunday when they lost 3-2 to Southampton at St Mary's.
Solari's opposite number Zoran Mamic felt a gruelling Club World Cup campaign caught up with his exhausted Al Ain side in the final.
"We had opportunities in the first half, but we missed them and at this level we pay when Real Madrid are in front". Modric put Madrid in charge a minute later when he curled an unstoppable left-footed shot around a defender and diving goalie Khalid Eisa. Marcos Llorente doubled the European champions' lead on the hour-mark with a superb volley from outside the area. In 2016, Real Madrid defeated Kashima Antlers 4-2; whereas, in 2017, the Spanish club had defeated Gremio 1-0.
The tsunami struck the Sunda Strait, which sits between the islands of Java and Sumatra, on Saturday night.
The cause of the tsunami has not been determined but the Indonesian National Board for Disaster Management said an undersea landslide linked to the eruption of nearby Anak Krakatoa was a possibility, reports Efe news.
In doing so, the LaLiga giants have now claimed a fourth Club World Cup title in the past five years.