The USA, ranked number one in the world, handed their opponents a volleyball schooling in the first set, but Brazil, who saved six match points in their quarter-final against Russia, kept their composure to turn the match on its head.
Led by Jaqueline Carvalho, who top-scored in the match with 18 points, Brazil claimed their second women's volleyball title with a 11-25 25-17 25-20 25-17 victory.
"There are no words for this emotion," said Brazil's libero Fabiana Oliveira, who broke down in floods of tears after the match. "We love this, we live this both on and off the court."
The gold medal was all the sweeter for Brazil, after they were heavily criticised in the group stages following losses to the United States and South Korea that had pushed them close to elimination.
"The critics that we had at the beginning were important for us to grow," Oliveira added. "Being second was never an option. We're gonna enjoy this a lot."
Brazil fans were rocking in the aisles of the Earls Court arena as their team completed a rousing victory that they hope will be the first part of a golden volleyball double with their men's team playing Russia in the final on Sunday.
"They started serving much more aggressively, in all honesty they were better than us. They were pressing us and we didn't really respond as well as we should have done," USA coach Hugh McCutcheon said.
Japan beat South Korea 3-0 earlier on Saturday to win bronze.