Romanian Halep had impressive form heading into the final after handing Williams her heaviest defeat in 16 years - 6-0 6-2 - in the round-robin stage.
But that did not translate into the Singapore final, which saw Halep struggle on serve before capitulating in the second set.
The French Open runner-up was quick to praise the resurgent Williams, but expressed frustration at her inability to handle the big occasion.
"She was more motivated and more focused maybe in this match, and she tried to hit the balls very strong," fourth-ranked Halep told reporters.
"I knew she will play better this match because she saw how I play, she saw what she has to do during the match. So she did really well.
"I was a little bit nervous. I was tired a little bit and I couldn't make the step into the court to open the court to play more aggressive," Halep said.
"I gave everything today, and, you know, that was my level. [It] wasn't my best day, but I'm still happy and I'm still enjoying this moment because it's a good moment for me."