Anya Shrubsole was the star for England, claiming figures of 6-46, as India fell short of their 229-run target despite half-centuries from Poonam Raut and Harmanpreet Kaur.
Earlier in the day, England had struggled on their way to 228-7 from their 20 overs, with Nat Sciver top scoring with 51.
Goswami keeps England in check as they post just 228
After winning the toss and choosing to bat first, England never really put the pedal down during their innings on what proved to be a tough track.
Lauren Winfield and Tammy Beaumont both started well, making 24 and 23 respectively, but when they were joined by Heather Knight (1) back in the hutch, England found themselves in a bit of a hole at 63-3.
The duo of Sarah Taylor and Sciver then got England back on track, sharing a partnership of 83. Taylor failed to hit a boundary during her crucial innings of 45, before she was caught behind off the bowling of Jhulan Goswami.
Goswami threatened to tilt the balance in India's favour during the middle overs, and when trapping both Sciver and Fran Wilson LBW she ended with figures of 3-23 from her ten overs.
Crucial late order runs once again from Katherine Brunt (34) and Jenny Gunn (25*) pushed England up to 228, which proved to be a competitive total.
Shrubsole claims six wickets as England regain World Cup
After plundering scores of 90 and 106* in the opening two fixtures of this World Cup, Smriti Mandhana's poor form continued through to the final, and she fell early in the Indian chase for a duck after being bowled by Shrubsole.
Mithali Raj then joined Raut at the crease, and they were going well until a run-out saw the end of the Indian captain for 17 as they fell to 43/2.
The semi-final hero Harmanpreet Kaur was then next to the middle, and after a circumspect start, she threatened to take the game away from England. After hitting a pair of sixes she started to find her groove, but tried one big shot too many after reaching 51 to find Beaumont on the boundary off the bowling of Alex Hartley.
Another half-century partnership, this time from Raut and Veda Krishnamurthy pushed India closer to a first ever World Cup triumph before the collapse ensued.
Raut was trapped LBW for a terrific 86 by Shrubsole in the 43rd over, and then by the end of the 44th she was followed back to the dugout by Sushma Verma, Krishnamurthy and Goswami.
At 201-7, the game was very much back in the balance, with India still requiring 28 from the final five overs.
Step forward Player of the Match Shrubsole, and after running out Shikha Pandey, she removed both Deepti Sharma and Rajeshwari Gayakwad in the penultimate over of the game to clutch victory for England from the jaws of defeat with a stunning spell of bowling.