Bryan Cooper sent the 6-1 shot straight to the lead with Nichols Canyon (2-5) his closest pursuer throughout.
The pair were almost as one before Petit Mouchoir jumped the second-last better and found another gear.
Petit Mouchoir sealed a seven-length success from Nichols Canyon with  Ivanovich Gorbatov in third.
Henry de Bromhead's charge  was slashed to 10-1 from 25-1 for the Champion Hurdle by RaceBets following the victory.
De Bromhead confirmed the two-mile hurdling crown at Cheltenham is high on his agenda.
He said: "It was amazing. He gave him some ride. It was brilliant and he jumped deadly.
"It's lovely when it works out. It's been a frustrating few days now but that's made up for it all. It's great.
"I'll speak to Eddie and Michael (O'Leary), but I think we have every right to consider the Champion Hurdle.
"He hasn't had a hard season thus far so the Irish Champion Hurdle might be a plan. I'll have to speak to the lads."
Petit Mouchoir ran out an impressive winner of the Ryanair Hurdle at Leopardstown on Thursday with odds-on favourite Nichols Canyon in second.