Odira set a championship record-- and a massively improved personal best time -- of 1min 54.62sec for victory, beating by 0.06sec the previous best set by Jarmila Kratochvilova of the then-Czechoslovakia in Helsinki in 1983.
Georgina Hunter Bell took silver in a personal best of 1:54.90 in a photo finish with her British teammate and training partner Hodgkinson, who had to settle for bronze.
Hodgkinson, who has won silver medals at the last two worlds, was the big favourite coming into the race despite having had limited time on the track.
The 23-year-old had admitted she was sweating on her place at the world championships until the last minute because she was sidelined for months by hamstring problems after winning Olympic gold in Paris last summer and only returned to track action in August.
In an extremely fast race, defending world champion Mary Moraa of Kenya raced into the lead, Hodgkinson hugging the curb on her shoulder.
At the bell, Hodgkinson was boxed in as Switzerland's Audrey Werro moved past her, but she battled her way down the inside lane to keep in contention.
With 200 metres to go, Hodgkinson finally got past Moraa on the inside as the pack split.
There followed Hunter Bell, and with 40 metres to run, it looked like a 1-2 for Britain at Tokyo's National Stadium.
But they had not counted on the finishing speed of Odira, who came racing past them to take a shock gold.
It was a first global medal for the 26-year-old Kenyan, who only made the semi-finals of the Paris Olympics and won silver in the African Games last year.
She had set her previous personal best of 1:56.52 when finishing second to Hodgkinson at last month's Silesia Diamond League meet.
