The second-seeded Serbian missed a match point in the second set before eventually winning 6-2 5-7 6-4 over the seven-time major champion.
It is the first time Ivanovic has won an outdoor event since her triumph at the 2008 French Open.
Venus Williams of the USA plays a forehand during her finals match against Ana Ivanovic of Serbia. Photo by Phil Walter/Getty Images
After both players held serve in the first two games of the match, Ivanovic broke the 33-year-old American twice to race to a 4-1 lead that she converted into a first-set victory.
Ivanovic looked to be in control of the match when she broke Williams in the fifth game of the second set but after squandering a match point at 5-4, she lost her serve in consecutive games to lose the set.
The Serbian immediately got on the front foot in the third set, breaking Williams to love, and saved four break points against her serve before serving out the match on her second match point.
Ana Ivanovic of Serbia plays a forehand during her finals match against Venus Williams of the USA. Photo by Hannah Johnston/Getty Images