Sabalenka was the pre-match favourite, having won 33 of her previous 34 matches on the Australian hard courts.
But Keys, a powerful baseliner, is one of the few players on the WTA Tour who has the weapons to damage Sabalenka.
The explosive match-up led to a gripping final where Keys won only one more point overall.
A stunning opening set, where she whacked 11 winners and had a rock-solid first serve, set the platform.
Keys was also helped by a nervy start from Sabalenka, whose once-unstable second serve returned to trouble her.
Two double faults in the opening game allowed Keys to break, while another set up a second break point in the fifth game which Sabalenka handed over with a sliced forehand into the net.
Keys continued to play lights out, thumping clean winners from the back of the court and also showing deft touches.
A bemused Sabalenka could only smile when Keys pulled out an ice-cold drop-shot on the way to holding for 5-1.
However, Sabalenka was furious with herself after a fourth double fault handed over another set point, which Keys took with a backhand winner.
“She played super aggressive. It seemed like everything was going her way,” said Sabalenka.
“I was just trying to put the ball back. I couldn’t really play my aggressive tennis and didn’t feel my serve that well.”
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