Chasing a modest target of 149 to win, the home team raced to 151 for two and won with a whopping 26 balls to spare.
It was Rajasthan's third straight win in the competition, following losses in their first three games, and took them up to third in the table.
The result also bolstered their already impressive record against Deccan Chargers. The champions in the inaugural edition have now won four of their five encounters against the defending champions.
For the team from Hyderabad, it was their second loss in five games.
Yusuf played a starring role with a superlative 34-ball 73, which was inclusive of two hits to the fence and a massive eight over it.
It was the second significant contribution from the all-rounder's blade in this tournament following his 37-ball 100 in Rajasthan's opening loss to Mumbai Indians.
The Rajasthan chase began in the most dramatic fashion. Michael Lumb (45) edged a Chaminda Vaas delivery and VVS Laxman appeared to have taken the catch at first slip. But the fielder admitted that the ball dropped just short of him and Lumb lived to fight another day.
The Hampshire batsman celebrated the reprieve with successive boundaries through midwicket. The South African was fortunate again, twice in fact, in the second over bowled by RP Singh. A clear edge off his blade went between the keeper and slips to the fence, and off the next ball Herschelle Gibbs failed to hold on to an opportunity offered at backward point.
Lumb thanked his opponents with four successive boundaries in RP Singh's second over. He made the most of his good fortune to give Rajasthan Royals a rollicking start
Naman Ojha (14), who had till then been a mute spectator, joined the onslaught with a maximum and followed it up with a boundary off Rohit Sharma.
However, the introduction of Pragyan Ojha in the seventh over got the team from Hyderabad their first breakthrough.
Ojha accounted for his namesake, having him smartly stumped by Gilchrist.
The first wicket partnership yielded Rajasthan 55 runs off 39 balls, and in a bid to build on the start the hosts promoted Yusuf up the order.
And Yusuf expressed his gratitude to the think-tank by smashing the second ball he faced for a maximum over long-off.
He continued the onslaught with a couple of boundaries and a six in Ojha's second over.
As the teams headed for the first strategic time-out, Rajasthan were sitting pretty at 84 for one.
Yusuf smashed the fourth ball after the breather over the long-on fence for another maximum. However, Lumb's fortune finally ran out, as he was run-out five runs short of what would have been a maiden half-century.
His 32-ball 45 was inclusive of seven hits to the fence.
Yusuf atoned for his role in Lumb's run-out by smashing Vaas over long-on for his fourth maximum.
He got his fifth in that over as well, this time over long-off and that shot also helped him reached his half-century (off just 23 balls).
And three more sixes from his blade, two in the 16th over bowled by Rahul Sharma, ensured an emphatic win for his side.
For the record, Faiz Fazal remained unbeaten on eight.
Earlier, the visitors put up 148 for nine in their stipulated 20 overs, the lowest total for the Chargers in this edition.
In a battle of the two IPL champions, Royals, the champions in the inaugural edition, stuck to their tasks well and executed their plans to perfection whereas Chargers lost ground after losing wickets at regular intervals.
Rajasthan drew first blood when Sumit Narwal had Adam Gilchrist (1) caught by Yusuf Pathan at cover.
But Herschelle Gibbs (25) eased the pressure with two maximums in the next over (off Abhishek Jhunjhunwala), the first over long-off and the second straight over the bowler's head.
The over cost Rajasthan 16 runs as Warne's gamble backfired.
Gibbs continued the momentum with a boundaries over mid-on off Siddharth Trivedi and VVS Laxman (10) joined the party with a slog to the midwicket fence off the same bowler.
Another miscued hit, this time off Shaun Tait, cost Laxman his wicket, Yusuf making no mistake with the catch at mid-on.
Again Rajasthan were guilty of letting go the momentum.
Andrew Symonds (22) announced his arrival with successive boundaries off Narwal, the first towards the backward square-leg boundary and the second smashed over point.
Two balls later, Narwal witnessed a classy cover drive from Symonds' blade racing its way to the fence - the third boundary of the over.
And as the field restrictions eased (after six overs), the team from Hyderabad found itself evenly placed at 55 for two.
However, Warne introduced himself into the attack and did the trick for his team by having the dangerous Gibbs stumped.
The South African's 14-ball cameo consisted of two hits to the fence and two over it but there was a sense of deja vu in his dismissal.
And on this occasion, Rajasthan didn't let the opportunity slip.
Symonds was run out by Jhunjhunwala in the horrible mix-up soon after to further compound Deccan Chargers' woes.
T Suman (9) was fortunate to survive a loud appeal from Warne.
And as the teams headed to their respective dug out -- in the first strategic time-out (after nine overs) - the Rajasthan team had the upper hand, having restricted the opposition to 72 for four.
Rohit Sharma eased pressure a bit by smashing Trivedi over the midwicket boundary for a maximum and following it up to a boundary to extra cover.
But Tait cleaned up Suman to put the pressure back.
And another direct hit from Jhunjhunwala -- that found Venugopal Rao (2) short of his crease -- meant Deccan Chargers were in dire straits going into the second strategic timeout -- at 108 for six.
Soon after resumption, Sharma had a stroke of fortune when Voges dropped a sitter at deep midwicket (off Yusuf).
And he celebrated the reprieve by smashing a Tait full toss for a maximum in the next over. Three balls later, Sharma was fortunate again, surviving a run-out attempt.
However, Chaminda Vaas (8) wasn't as fortunate -- a direct hit from Dogra found him well short of his ground.
Rahul Sharma (10) smashed a six off Narwal before the bowler had him caught by Jhunjhunwala at long-on two balls later to exact his revenge.
However, his final over, the innings' penultimate, did cost Narwal 16 runs.
But Tait had Sharma caught by Lumb at short third-man to ensure Rajasthan a comapratively easier target when they come out to bat.
Tait was the most successful bowler for Rajasthan with figures of three for 22.
Sharma played a lone hand with a 35-ball 49, inclusive of two hits to the fence and three over it. He was out in the final over, missing out of a well-deserved half-century.
Earlier, Deccan Chargers won the toss and predictably elected to bat first.
"The wicket looks good. There's a bit of grass though and so it should be interesting to see how it plays," said captain Adam Gilchrist, adding, "But we have to put up a good total first."
Gilchrist's Rajasthan counterpart, Shane Warne, seemed to concur.
"We would have batted first as well.
"But we will look to restrict them first to 165-170 and then chase down the score," he added.
Teams:
Deccan Chargers: Adam Gilchrist (captain), VVS Laxman, Herschelle Gibbs, Andrew Symonds, Rohit Sharma, T Suman, Venugopal Rao, Rahul Sharma, Chaminda Vaas, RP Singh, Pragyan Ojha.
Rajasthan Royals: Shane Warne (captain), Naman Ojha, Michael Lumb, Faiz Fazal, Abhishek Jhunjhunwala, Yusuf Pathan, Paras Dogra, Adam Voges, Shaun Tait, Sumit Narwal, Siddharth Trivedi.