Connor Cook was an efficient 22-for-36 for 332 yards, two touchdowns and an interception, while Jeremy Langford totaled 84 yards on 23 carries and a score for the Spartans (13-1), who won their fourth Rose Bowl and first since 1988.
"People keep asking me does the championship feel better, all these different things, these levels of excitement," said Michigan State head coach Mark Dantonio. "I can just tell you that every level, I'm just so excited for our football team and our players and our Spartan fans and our families of our coaches, and our coaches."
Lippett finished the game with five catches for 94 yards along with the score, and Trevon Pendleton also caught a touchdown pass for Michigan State, which handed Ohio State its first loss in two years in the Big Ten championship game.
Kevin Hogan was just 10-for-18 for 143 yards and an interception while Tyler Gaffney had 24 carries for 91 yards and a score for the Cardinal (11-3), who had taken a 20-14 win over Wisconsin in this event last year.
"I told the guys, we had one heck of a year, and got beat today," said Stanford head coach David Shaw. "They played better. They made more plays. That's the bottom line. You know that every time you suit up, it's about who makes the most plays and who scores the most points."
The Rose Bowl is hosting this year's BCS National Championship Game and will also host one of the semifinal games that will take place under the new playoff format next year.
The score had been tied at 17-17 since early in the third quarter, but Michigan State got the ball back at the Stanford 27 after a short punt, combined with a 19-yard return from Macgarrett Kings.
On the third play of the possession, Cook hit Lippett with a pass over the middle near the 5, and he stretched it in on a 25-yard score for a 24-17 lead with 13:22 to play.
Each team then punted once, with Stanford getting the ball back at its own 28 and Michael Rector taking a carry 27 yards to get the ball across midfield. A holding call on Michigan State gave Stanford a fresh set of downs, but the drive stalled at the MSU 17.
Lining up for a 34-yard field goal, the holder bobbled the ball, but completed a pass for an apparent first down, but an illegal formation call on the team moved the ball back five yards. Jordan Williamson then hit a 39-yarder to make it a 24-20 game with 4:15 to play.
Michigan State was then held to a three-and-out and Stanford got the ball back at its own 25 with 3:06 to play and one timeout left.
Quickly facing a 4th-and-1, Ryan Hewitt took a quick handoff and tried to get over the pile, but he was knocked back and the Spartans went into the victory formation.
Stanford began the game with the ball and put seven points on the board less than four minutes in, as Gaffney took the ball to the left, broke a tackle and raced into the end zone on a 16-yard score. The big play of the drive saw Hogan and Rector connect on a 43-yard gain.
Later in the first quarter, Stanford got a 34-yard field goal from Williamson for a 10-0 lead with 1:40 to play in the frame. The 7-play, 69-yard march saw Gaffney break a 47-yard run on the first snap.
The Spartans answered on their next touch, as the team went 75 yards in 13 plays, capping the drive when Langford took a handoff up the middle, bounced off the line and ran it in from the left for a 2-yard score and a 10-7 game with 10:45 to play in the first half.
Neither team got into scoring position over the next several touches, and it was Stanford's defense that came up with a big play, as the team put pressure on Cook and he floated a pass toward the line that Kevin Anderson came down with, taking it into the end zone for a 40-yard score and a 17-7 game with 2:07 to play in the first half.
The Spartans, though, came right back with a 75-yard march as Bennie Fowler's 37-yard grab took the ball down to the Stanford 3. Two plays later, Cook rolled out to the right and found Pendleton in the end zone for a 2-yard score to make it a 17-14 game going into the break.
Michigan State started the second half with the ball and Cook and Fowler hooked up on a 60-yard play to move it into the red zone. However, the drive stalled and Michael Geiger hit a 31-yard field goal to tie the game with 12:56 left.
Michigan State improved to 10-14 in bowl games, winning its past three appearances ... Stanford fell to 11-13-1 in bowl games, including 6-7-1 at this event ... MSU totaled 397 yards, and controlled the ball for 31:11, while Stanford had 305 yards ... Michigan State has won four of the six games with Stanford.