Nathaniel secured a dramatic win in the 2011 King George VI and Queen Elizabeth Stakes, but Rewilding was put down after breaking a leg late in the race.
The winner, ridden by William Buick and trained by John Gosden, held off a late surge from pre-race favourite Workforce to close out the victory at Ascot.
St Nicholas Abbey came home in third but the race was marred when Rewilding broke down in the final straight.
Jockey Frankie Dettori escaped with minor injuries after he was thrown off.
But the Mahmood Al Zarooni-trained Rewilding broke a bone and winning trainer Gosden was one of the first on hand to take hold of the stricken horse and tend to him.
Gosden said: "I attended the horse with the lad. He just put his leg down wrong and the cannon-bone snapped clean in two.
"I've seen it happen with a horse galloping in a paddock and they feel nothing. The vet was on hand as we gave the horse a final munch of grass and he dealt with it immediately."
Gosden, whose horse Nathaniel was a late entry to the race and the only three-year-old in the field, added: "It was an intelligent ride by William, and I left it completely up to him how to ride the race.
"He let him stride on, which was not ideal, but then again Workforce would have been better if they had gone a pace. This horse is getting better and better, and showed it.
Nathaniel, who is also the first three-year-old to win the race for eight years, set the pace from the outset of the 1.5 mile race but the 6-5 favourite Workforce had looked all set to pick up the leader, only for Nathaniel to find extra as the pair effectively sprinted to the line.
Both horses veered left across the track, Workforce markedly so, but 11-2 chance Nathaniel was always holding the upper hand and prevailed by two and three-quarter lengths to ensure back-to-back Ascot wins for Gosden's horse, having already triumphed in the King Edward VII Stakes at the Royal meeting.
Gosden added: "To finish in front of a horse like Workforce is everything. He sets the standard - he's an Arc winner, a Derby winner. He's a phenomenal horse."
Winning jockey Buick, who received the trophy from Prince Harry, offered his condolences to all those involved with Rewilding and spoke of his surprise of Nathaniel's pace.
"I always knew he was a very good horse, but I didn't know he was going to be as good as this," he said.
"It's fantastic to win a King George. I remember coming along with my father [former jockey Walter Buick] to see this race. Now I'm here winning the King George and it's just a dream come true."
King George VI and Queen Elizabeth Stakes:
5 Nathaniel (William Buick, 11-2)4 Workforce (R L Moore, 6-5 fav)5 ran