His 206.17 points in the free skate, second to Chen's 215.08, gave him 317.85 total.
It was almost enough to pull off one of the great comebacks in Winter Games history, from 17 place to the podium, but Chen's incredible climb ended in fifth place Friday night (San Diego time).
His point tally after Saturday's free skating final, stood at 317.85 - nearly 11 points more than his compatriot Shoma Uno, who won silver.
But Hanyu, Fernandez and Uno skated true to form to capture the medals.
Javier Fernandez of Spain took bronze in the event. One of the most recognisable faces in winter sport, Vonn won the gold in the downhill in 2010 but missed out on the Sochi Olympics four years later through injury.
Fernandez couldn't match Hanyu, and Uno finished the day by moving up from third to second overall, loading a high-scoring quad and three triples into the final minute of his routine.
Japan exploded with joy at his win, the first time a male figure skater defended his Olympic title since American Dick Button in 1952. Next up was three-time world champion Patrick Chan of Canada, and he had a supbar performance to drop below Chen.
"I have been working on it for a while", Chen said after his skate. He finished with a lifetime personal best of 192.16 points in the long program.
After the back-to-back disappointing performance, Nathan Chen rebounded on Saturday in in his first two Olympic skates, he landed to the historic six quadruple jumps in a single routine, this is something that no one has ever seen here.
That left Zhou, the son of Chinese immigrants, in 12th place entering the free skate. "A lot of times it's the gold medalist, but I have a feeling that my life has changed forever". "I think that tightened me up and made me super cautious out there and that's not the right way to skate". "I cherished every competition, and I need to focus on the details", said Jin.
"Honestly, I didn't care anymore", Chen said. "I might as well just go for everything right now, I have literally nothing to lose so I might as well just go for it". He proceeded to do a quad flip in combination with a double toeloop; another quad flip, in which he put his hand down but did not fall; a quad toeloop/triple toeloop; another quad toeloop; and a quad salchow. "I just did my best today".
"I'm not fully healed, I really pushed it hard and there were some jumps and elements that I could not perform, but I forced myself to do so", revealed Hanyu, who damaged ankle ligaments in a training accident in November.