Former world champions Valentino Rossi and Casey Stoner both crashed out after Rossi attempted an ill-advised overtaking manoeuvre at the end of lap six.
Yamaha rider Lorenzo then eased away to a comfortable victory at Jerez.
Ducati rider Rossi had stormed through the pack after starting the race in 12th place as he used all his experience and was able to continue but the collision ended Repsol Honda rider Stoner`s race.
Marco Simoncelli then looked set to win his maiden MotoGP race as he was left in the lead but he crashed out to hand Lorenzo the win and the overall lead in the standings.
Stoner`s team-mate Dani Pedrosa made it a one-two for Spain with Nicky Hayden third and Hiroshi Aoyama fourth.
Rossi eventually came home in fifth place while British rider Cal Crutchlow was eighth after crashing late on.
The field started with full wet tyres on a damp track in light rain and Rossi put his wet weather skills to good effect as he made up four places on the opening lap.
Pedrosa went the other way and was down in 10th place as Rossi moved into sixth at the end of lap two.
The Italian was soon up into fourth and setting the fastest lap of the race as he continued to carve through the field while Simoncelli mounted a challenge as he passed Lorenzo and Stoner to take the lead.
Rossi then moved past Lorenzo to take third as the rain eased off before he dived up the inside of Stoner into turn one at the start of lap seven.
But the nine-time champion lost the front end of his Ducati and took Stoner down with him into the gravel trap, and while Rossi was able to remount his bike and continue Stoner`s race was over.
That left Simoncelli with a clear advantage over Lorenzo, with Rossi`s team-mate Hayden promoted to third place.
Simoncelli had a huge lead but crashed out at the same corner as Rossi when he high-sided his Gresini Honda and was forced to retire.
That left Lorenzo in the clear ahead of compatriot Pedrosa as the rain returned and a host of riders crashed out.
There was British success in the earlier races as rookies Danny Kent and Taylor Mackenzie claimed fourth and fifth places in the 125cc race with Bradley Smith fourth in the Moto2 class.
Rossi immediately entered the Honda garage at the end of the race to apologise for the clash to Stoner, who was calm and accepted the apology by telling the nine-time world champion: "Your ambition outweighed your talent."
The Australian was less pleased with the marshals, who helped Rossi remount his bike to join the action while Stoner was left to unsuccessfully attempt to restart his Honda on his own.
He said: "With the accident, I heard Valentino arriving and I wasn't worried about anyone passing me at that point in the race so I gave him plenty of room.
"It was a racing incident and there's not much we can do, what is more frustrating is the reaction of the stewards and their assistance for Valentino and not for me, it was unbelievable."
Rossi told Italia1 television: "It's completely my mistake and I have to say sorry to Casey.
"I know that he's very angry because he didn't make any mistakes. I went straight to say sorry.
"At the end the fifth place is a positive result if it was in the dry, but in the wet we were more competitive.
"We were lucky today with the weather, and the weather gave us a great chance to have the first victory or the first podium with the Ducati. Unfortunately I threw away this chance with a mistake."
