A misfiring spark plug saw a frustrated Vettel retire his Ferrari early in the 53-lap race at Suzuka, leaving the way clear for pole sitter Hamilton to claim his eighth victory of the season for Mercedes.
Just six weeks ago Vettel was leading the championship, but a first corner crash in Singapore then technical woes in Malaysia and the 16th round in Japan have left Hamilton in a strong position to win his fourth world title.
With Vettel sidelined, Malaysia winner Max Verstappen
emerged as the main threat to Hamilton, finishing in second place, with his Red Bull teammate Daniel Ricciardo completing the podium.
Hamilton's Mercedes also suffered a technical issue and he had to survive a late scare as Dutchman Verstappen closed rapidly, but he held on to secure his 61st career victory, his fifth in the last seven races to put him in the box seat in the championship race.
" I could only have dreamed of having this kind of gap," he said. "Ferrari has put in such a great challenge all year round."
Unfortunately for Vettel, that challenge has petered out and he cast a dejected figure after his retirement.
"Pity the last two races with reliability issues, but it is like that sometimes," he admitted.
"We still have a chance this year. We got a lot further than people thought, so there are some positives."
But with only a maximum of 100 points available, Vettel faces an uphill battle to add to his four world crowns with Red Bull and Hamilton has a mathematical chance of wrapping up the title in the United States in two weeks time.
Mercedes has also taken a vice-like grip on another world constructors' title, with fourth place in Japan for Valtteri Bottas, ahead of the second Ferrari of Kimi Raikkonen.
It leads Ferrari by 145 points with four rounds remaining, with the improving Red Bull team in third place.
Red Bull team principal Christian Horner was delighted by the double podium for his driving duo but also had his say on the title race.
"That is a killer blow for Sebastian today," he told BBC Radio Five. "It is difficult to imagine Lewis not winning the championship, but anything can happen."
Behind the front runners, the Force India duo of Esteban Ocon and Sergio Perez finished sixth and seventh, with Haas teammates Kevin Magnussen and Romain Grosjean eighth and ninth.
Felipe Massa completed the points scoring for Williams, with two-time champion Fernando Alonso in 11th for McLaren team after starting from the rear of the grid.
Britain's Jolyon Palmer was 12th in his last race for Renault, his replacement Carlos Sainz spinning off in his Toro Rosso, bringing an early safety car.
Vettel, who was slipping through the field, retired shortly after that. "Box Sebastian, box," came the message over race radio. "We will retire the car, I'm afraid."