The pole sitter led throughout and won by 3.2 seconds despite a Kers malfunction from McLaren's Button and Renault's Heidfeld at the dry Sepang circuit.
Vettel wins easy again for Red Bull in Malaysia
The pole-sitter led throughout to win by 3.2 seconds from McLaren's Jenson Button, with Renault's Nick Heidfeld hanging on for third.
Vettel's Red Bull teammate Mark Webber recovered from a poor start, using a four-stop strategy around the Sepang International circuit to claim fourth place, with Ferrari's Felipe Massa fifth.
More on Formula One
• Button ready to close in on Red Bull
• Three 'home' teams but local fans in Malaysia are backing the big ones
• Vettel delighted to snatch pole from Hamilton
• F1 notebook from Malaysia
• More coverage of the Malaysian Grand Prix
Ferrari's Fernando Alonso and McLaren's Lewis Hamilton had a collision in the closing laps that dropped them down to sixth and seventh respectively.
Sauber's Kamui Kobayashi took eighth place, while Mercedes' Michael Schumacher made a very late passing maneuvre to take ninth from Force India's Paul Di Resta, who took the last point in 10th.
Vettel's victory was made more impressive by the malfunctioning of the Kers device on the Red Bull, with the German told midway through the race that he could no longer use it.
Webber also appeared to have problems with it, dropping from third to ninth after just one lap. By contrast, both Renaults made storming starts, with Heidfeld moving from sixth to second by the second corner.
With rain surprisingly holding off throughout, the closing stages developed into a fight to see who could make their tires last longest. Button used his trademark tire management to claim second. Heidfeld came under intense pressure in the final laps but managed to hold off Webber.
One of the major talking points was a collision between old rivals Hamilton and Alonso with 10 laps to go. The Ferrari driver tried a switchback passing move on Hamilton but did not quite measure the distance correctly, and snapped off the left endplate of his front wing by nudging Hamilton's right rear tire.
Alonso had to pit for a new front wing, while Hamilton struggled thereafter as his tires degraded, and was passed by Heidfeld then Webber before admitting defeat and pitting for new rubber with only three laps left.