Sinner came into the clash having lost to Medvedev in their previous six meetings, including two earlier this season in the finals of Rotterdam and Miami, but the Italian kept pace with his opponent and sealed an opening first set via a tiebreak.
Both players struck brutal blows from the baseline and raced through their service games in the next set, before Sinner raised his level again in the tiebreak to complete a memorable win in Beijing.
"It means a lot," Sinner said of his win which followed a victory over number two Carlos Alcaraz in the semi-finals. "A lot of work.
"I felt like I was prepared for this match today. I've lost many times against him. It feels great especially when you beat a player you've never won against and this was a positive week.
"I had to overcome some tough challenges and I'm very proud of myself, how I handled the situations. It has been awesome."
Sinner will become the second Italian in the history of ATP rankings (since 1973) to break into the top five when the latest list is released and will match Adriano Panatta's ranking of four, which was achieved in August 1976.
WTA BEIJING
Earlier, Iga Swiatek powered past fellow Pole Magda Linette 6-1 6-1 to reach the quarter-finals of the women's event, where she will play either Caroline Garcia or Anhelina Kalinina who face off on Thursday.
"I felt like I was playing a good game and I was in control from the beginning to the end. I'm happy that I was consistent. I didn't have ups and downs in the match so it doesn't matter who I'm playing," Swiatek said.
"If I play like that, I feel really confident."
Former French Open champion Jelena Ostapenko stunned fourth seed Jessica Pegula 6-4 6-2 to book a quarter-final clash with Liudmila Samsonova, who beat Marta Kostyuk 6-4 6-7(4) 7-5.
"I think I always play quite well in China," said Ostapenko, a 2017 semi-finalist in Beijing. "Finally, tournaments are back here and with a lot of fans, which I like a lot.
"After the US Open I had a bit more confidence and I had really good preparation before that.
"Some matches during the year were close. I was losing them, but they were very close. I felt like at some point they have to go my way. It's working now."
Elena Rybakina avoided a huge upset as the former Wimbledon champion battled from a set and 4-2 down to claim 10 out of the last 11 games against Russian 16-year-old Mirra Andreeva to prevail 2-6 6-4 6-1.
The Kazakh next meets world number one Aryna Sabalenka or Jasmine Paolini.
