The 19th-seeded American put in the best performance of her life, lifting the crown in Melbourne after a two-hour thriller.
As a result, she became the fourth-oldest first-time Grand Slam champion in the professional era after Flavia Pennetta, Ann Jones and Francesca Schiavone, and her win ended Sabalenka's bid for a third straight Melbourne Park crown.
"Okay bear with me I'm absolutely going to cry," Keys said as she cradled the Daphne Akhurst Memorial Cup.
"There's no way I get through this in tears ... Congrats Aryna, unbelievable playing, I'm glad I finally got you back.
"I always feel so at home here. I made my very first Grand Slam semi-final in Melbourne, to now have won my first final in the same place means the absolute world to me."
Sabalenka made a couple of double faults to drop serve in the opening game and looked off colour in the early exchanges as the free-hitting Keys heaped pressure on the top seed with a dipping crosscourt winner en route to a double break.
The 19th seed rode her luck after a net cord winner and went up 5-1 in 20 minutes before conceding a break with a wayward backhand before Sabalenka gifted her set point with a fourth double fault.
Keys, who was hitting much harder than her opponent on both flanks, fired her 11th winner with a backhand down the line to clinch the opening set but Sabalenka began to mix up her game in the next set and sliced her way through to level the match.
Both players relied on their powerful serves and shot-making to remain level until 5-5 in the decider but there was one final momentum shift as Keys produced some blistering winners to claim the next two games and the biggest triumph of her career.
Tears shed
She was overcome by emotion and shed tears with her team in the stands, while Sabalenka smashed her racket and covered her face with a towel.
"There definitely was a bit of frustration because I was so close to achieving something crazy," Sabalenka said.
"I was just trying to let it go and be a good person, be respectful. It's okay. I know that after tough losses, there are good wins. I'll keep working and make sure that next time, if I'm in this situation, I'll play better."
Keys is the first player to claim the trophy by defeating the world number one and two at a major since Russian Svetlana Kuznetsova at the 2009 French Open and the first at Melbourne Park since compatriot Serena Williams 20 years ago.
Tipped to become a world number one after she reached the Australian Open semi-finals at 19, Keys was beaten by compatriot Sloane Stephens in the 2017 US Open final and struggled to translate deep runs at majors into titles
Three years ago she spoke about the "dark pit of despair" she was in when her career had stalled due to the suffocating pressure of trying to stay at the top level of the sport.
Biggest prize
She came close to another final when she led Sabalenka 6-0 5-3 in the 2023 US Open semi-finals, only to lose that match after two tiebreaks, but a second win in her sixth clash with the 26-year-old delivered her biggest prize.
It made her the second oldest woman to capture her first Australian Open singles title since 1968 after China's Li Na, who was 31 when she won the title in Melbourne in 2014.
"I have wanted this for so long I have been in one other Grand Slam final and it didn't go my way," she said.
"I didn't know if I was going to get to this position every again. But my team believed in me so much... they believed in me when I didn't believe in myself."
Sabalenka's smile returned later as she was left to digest a rare defeat in the Grand Slam that has defined her career, but she showed the charisma that has endeared her to fans as she jokingly blamed the loss on her team.
"I don't want to see you for the next week, I really hate you," she added to laughter from the crowd. "No really, thank you very much for all you're doing for me, blah blah blah."
