The winners looked the better team during the first-half at the end of which they led 1-5 to 0-5 after playing against the wind.
However, they lost their way for long periods of the second-half and James Stephens got in front after Eon McCormack goaled (1-9 to 1-8).
Muckalee recovered and late scores from McGrath (1-1) and a point from Eoin McGrath carried them over the line.
The champions play in the Leinster Club IFC later in the season.
Scorers for Muckalee: C McGrath (1-6, 1-0 pen, 0-1f), R Shore (1-2), J Mulhall, E McGrath (0-1 each).
Scorers for James Stephens: E McCormack (1-1), Jackie Tyrrell, D McCormack (0-3 each), M Hoban, N Tyrrell (0-1 each).
MUCKALEE: J Coonan; James Maher, O Walsh, A Murphy; M Dowling, P Nolan, M Morrissey; Joe Maher, P Maher; S Coonan, R Shore, T Morrissey; C McGrath, B Byrne, John Maher.
Subs: J Mulhall for S Coonan, C Maher for T Morrissey, E McGrath for B Byrne.
JAMES STEPHENS: R Manogue; B O’Brien, C Behan, G Flood; N Tyrrell, M Hoban, L Hickey; Jackie Tyrrell, M Harkin; A Lawlor, E Larkin, D McCormack; R Hayes, E McCormack, R O’Keeffe.
Subs: B Hickey for M Harkin, James Tyrrell for R O’Keeffe.
Referee: T Duggan (Mullinavat).