Zhao needed to win just one frame in the evening session to clinch his historic title in the best-of-35 showpiece at Sheffield's Crucible Theatre.
The 28-year-old had built an 11-6 lead on Sunday and, with the title in sight, he turned the screw on Williams in Monday's afternoon session.
Zhao won four of the first five frames to move 15-7 ahead, raising the prospect of wrapping up the final with a session to spare.
But by the evening session, a rejuvenated Williams lived to fight another day as he made it 9-17 after a fine century break of 101, before wrapping up the second frame of the evening after capitalising on mistakes by his opponent to close the gap to seven frames.
He then wrapped a third consecutive frame with an impressive 96 as the unlikeliest of comebacks began to show signs of life.
Williams ensured the final would go past the interval as he wrapped up a 12th frame with a 73, finally forcing a wry smile out of Zhao.
Zhao shuts Williams out
After the break, Zhao racked up 23 before a mistake on a long red, although Williams failed to capitalise on a long black with the rest at a crucial moment in the match.
He then built an unassailable lead to finally confirm the 18-12 victory with a collected 110 break to bag his first ever world championship.
"I can't believe what I've done," an emotional Zhao told the BBC.
"It's very exciting, thank you.
"I was so nervous tonight. Mark is still a top player and put me under so much pressure. He's the best.
"I'm not tired. I'll maybe have a good drink tonight."
Along with making history in front of millions of people watching in China, Zhao also earned a whopping £500,000 for the victory.
'A new superstar'
"It's been a brilliant tournament for me," Williams told the BBC after suffering defeat.
"The support I've had for the past two weeks has been unbelievable.
"But what a potter Zhao is. I'm glad I'll be too old when he's dominating the game.
"I've got nothing but admiration for what he's done, coming through the qualifiers.
"He hasn't played for two years, bashed everybody up. There's a new superstar of the game."
"I'm still playing quite good stuff, even though my eyesight is a bit blurry," he added.
"When I was stood on the steps and they were all on their feet - it brought a tear to the eye.
"But the night belongs to Zhao, and congratulations."
The Chinese sensation, who had a session left unused in his 17-7 semi-final rout of seven-time world champion Ronnie O'Sullivan, was unable to achieve that feat this time as Williams briefly stopped the rot.
The 50-year-old Welshman was no match for Zhao's dynamic shot-making and relentless break-building as the Chinese star swept to the brink of snooker immortality.
The final showdown was set to either crown the oldest champion ever, or the first winner of snooker's biggest prize from China.
Zhao's remarkable comeback
Zhao is playing as an amateur as he works to rebuild his career following a 20-month ban stemming from a 2023 betting scandal.
The 2021 UK Champion admitted to breaching integrity rules by assisting another player in fixing two matches and betting on matches himself.
The scandal saw 10 Chinese players sanctioned, including lifetime bans for Liang Wenbo and Li Hang.
Now reinstated but without professional status, Zhao was forced to battle through four qualifying rounds to reach the World Championship main draw.
Williams will climb to number three in the world rankings and pick up a £200,000 runners-up prize.