As the pack jostled for position on lap 1, the Haas driver was tagged by AlphaTauri's Daniil Kvyat and sent careening into the Turn 4 barriers at high speed.
In terrifying scenes eerily reminiscent of Formula 1's more dangerous past, Grosjean's car split in two and caught fire, with the front portion of the Haas having punched through the armco barrier.
However, in scarcely believable testimony to the strength and safety standards of modern F1 cars, Grosjean was able to walk away from the inferno having suffering nothing more than minor burns and suspected broken ribs.
The Frenchman's accident meant that the race was stopped for over an hour while marshals replaced the damaged barriers.
When proceedings did resume, Kvyat was in the thick of the action again almost immediately, clipping the right rear tyre of Lance Stroll and tipping the Canadian upside down, bringing out the safety car and seeing Kvyat slapped with a 10-second penalty for his troubles.
But despite the chaos behind him the race's opening stages, Hamilton remained in control from the front throughout, and was never seriously threatened as he took his 11th win from 15 races so far this season.
"It was such a shocking image to see," said the Briton of Grosjean's crash. "It could have been so much worse. I think it shows an amazing job that Formula 1 and [world motorsport's governing body] the FIA have done over time to be able to walk away from something like that."
Behind Hamilton, Red Bull's Max Verstappen was the only other driver to keep close to the Briton's pace, coming home in a solid second place and taking the bonus point for fastest lap, with teammate Alex Albon rounding out the top three after Sergio Perez's Racing Point suffered a late engine failure while lying third.
Perez's retirement also promoted the twin McLarens of Lando Norris and Carlos Sainz into fourth and fifth, significantly boosting the Woking squad's hopes of finishing third in the constructors' championship.
Pierre Gasly took sixth in his AlphaTauri, followed by Renault's Daniel Ricciardo in seventh, while Hamilton's Mercedes teammate Valtteri Bottas salvaged eighth after an early puncture forced him to make an extra pit stop.
Ricciardo's teammate Esteban Ocon took ninth, with Ferrari's Charles Leclerc rounding out the top ten. Perez, Stroll and Grosjean were the only drivers to fail to see the chequered flag.
Hamilton's win sees the Briton extend his unassailable points lead to 332. Bottas remains second on 201, and Verstappen stays third with 189.
Mercedes are already confirmed as constructors' champions and now have 533 points. Red Bull's strong result puts them on 274 points and seals their second place, while Perez's late engine failure means McLaren leapfrog Racing Point to lead a tight battle for third place with 171.
Formula 1 remains at the Bahrain International Circuit for next weekend's Sakhir Grand Prix, to be held on the facility's shorter "Outer Circuit" configuration.
