Dixon pulled away at the end by 6.2 seconds at the 3.4-mile (5.5-kilometer), 11-turn Watkins Glen International, a natural road course in the Finger Lakes region of upstate New York.
It was the first win of the season for Dixon, who has four runner-up finishes for Target Chip Ganassi Racing, and seventh of his career. The New Zealander took advantage of a mistake by pole sitter Helio Castroneves, who led for the first 19 laps and seemed to be the man to beat before crashing.
Buddy Rice was sixth and Dan Wheldon seventh. The two women in the race didn't fare well. Danica Patrick finished 11th and Sarah Fisher 16th, two laps off the pace.
Dixon cut into some of Franchitti's big lead in the standings. Dixon led the most laps and picked up 18 points on the Scotsman and now trails him by 47 points with seven races remaining.