Sabalenka was the pre-match favourite, having won 33 of her 34 matches on Australian hard courts.
But Keys, a solid BaseLiner, is one of the few players on the WTA Tour who has the weapons to hurt Sabalenka.
An explosive match led to a dominating final where Keys won by just one point overall.
A stunning opening set, where she hit 11 winners and had a rock-solid service, set the podium.
Keys was also helped by a nervous start from Sabalenka, whose second serve that had never been a problem came back to her.
Two double fouls in the opening game allowed the Keys to break, while another created a second break point in the fifth game that Sabalenka delivered with a forehand slice into the net.
Keys continued to play lights out, rattling clean winners from the back of the court and also showing landing touches.
The jovial Sabalenka could only smile as Keys pulled down an ice-cold shot en route to holding on for a 5-1 lead.
However, Sabalenka was angry with herself after being handed a fourth double fault on another point, which Keys took with a backhand winner.
“She played very aggressive,” Sabalenka said. “It seemed like everything was going her way.”
“I was just trying to get the ball back. I couldn't really play my aggressive tennis and my serve wasn't feeling good.”
A furious Sabalenka felt the need to walk off the court 35 minutes into the first set, and after trying to clear her head, she was able to change the momentum.
Keys was unable to maintain her previous form, with her winners deteriorating and her first serve lacking accuracy.
While Sabalenka still lacked fluency — evidenced by a long forehand that left her dropping her racket in exasperation — she improved enough to dominate the second set.
A tight, tense decision did not result in a break point until the twelfth game.
Keys upped the ante with some deep comebacks that Sabalenka couldn't handle, before sealing the victory with a brilliant county winner.
“I played unbelievable,” Sabalenka said.
“I was trying my best. It obviously didn't work out too well.”
