McLaughlin won the second race of the Hy-Vee Milwaukee 250s doubleheader after finishing eighth in the first race over the weekend.
The Team Penske driver earned his third victory of the season, finishing half a second ahead of the six-time Indycar series champion Dixon.
"That was the most fun race I've had in Indycar," McLaughlin said.
"It was a blast. We just stuck with it. The car wasn't quite good at the start, and we just tuned her up, and it was awesome. A lot better in traffic today, which helped a lot.
"Yeah, burn the house down tonight. That was awesome. I'm pumped."
Defending series champion Alex Palou, Dixon's Chip Gannasi teammate, failed to pick up any points today.
The Spaniard will carry a 33-point lead over Australian Will Power into the next race, the season-ending Music City Grand Prix in a fortnight in Nashville.
McLaughlin is now third in the championship standings, 50 points behind Palou.
Dixon is fifth in the standings.
"I think had it gone a few more laps, it looked like he was starting to burn off his fronts (tires) a little bit," Dixon said.
"But congrats to McLaughlin. Pretty sweet to have a Kiwi 1-2 there."