The 21-year-old Dementieva dropped the first set and came from 2-4 down in the second, before running out to a 4-6, 7-5, 6-3 victory over the 1997 champion.
In the decisive set, the Russian broke in the eighth game and served out the match at love.
"It feels amazing, like a dream come true," said Dementieva. "I was waiting for this moment."
"To beat Lindsay, you have to be aggressive, you have to hit winners," she added of recording 43 clear winners, two more than Davenport.
She also committed only 26 unforced errors compared to Davenport's 42.
It was Dementieva's first triumph in her fourth final appearance on the WTA Tour and was worth $93,000.
Dementieva's run to the title was impressive, featuring victories over eighth seed Amanda Coetzer, fourth seed Daniela Hantuchova and top seed Justine Henin-Hardenne.
Dementieva had to save a match point against the Belgian world number four in the semi-final.
Davenport meanwhile, paid tribute to her unheralded opponent, whose most significant victory prior to Sunday was winning the silver medal in the singles competition at the 2000 Sydney Olympics.
"With the player she beat today, that's a great first tournament win for her," said Davenport. "I had a good week, but she also played really well this week with some big wins.
"She just played a great match today."
