With the score level at 3-3 after a see-saw match, GB won out in stunning display of defence and guts, with Maddie Hinch the hero for GB, shutting the Dutch out on numerous occasions.
It is Team GB's 24th gold medal of the Rio Games.
Both teams aiming to write history
Kate Richardson-Walsh would lead out GB for the last time in her career. Knowing they would improve on their bronze on home soil and in 34 years ago in Barcelona, could they replicate the feat of Seoul in 1988, when Sean Curly's men won gold in the gold-medal match versus West Germany?
The Netherlands women were going for their third successive gold medal after Beijing in 2008 and London four years ago. As world number ones, Oranje were favourites on paper, or turf as it were.
The GB women however had won all seven of their games in the Olympic tournament, with the Dutch winning six but being held by New Zealand - who Britain beat in the semi-final in reaching the final.
See-saw opening half
The Netherlands looked to catch GB off guard early. After just five minutes, sloppy play from Britain saw Maartje Paumen free in the area. Sam Quek dived in to intercept, but could only bring down the forward as referee Michelle Joubert signalled for the penalty stroke. Paumen's middle effort however was saved by Maddie Hinch, to the relief of Quek.
The Dutch women were denied on two more occasions by Hinch in the GB goal. Then on the break, Sophie Bray found space on the left of the D and juggled the ball around the black shirts surrounding her. Bray's shot was parried by Joyce Sombroek but with Lily Owsley prowling, the 21 year-old Bristolian swept home to give GB the lead.
GB were taking the defending champions in their stride, but when Kate Richardson-Walsh was dispossessed, the Dutch broke and with Kitty van Male in space, manoeuvred away from Hinch before hammered an angled effort into the goal.
The Netherlands sensed blood and after Naomi van As clattered the bar, the resulting penalty corner saw Paumen sweep home past the diving leg of Finch, with less than five minutes of the half to go
To the British women's credit, they responsed immediately. It was again the work of the midfielders and after Owsley slapped a shot across the boughs of the Dutch goal, the ball ricocheted to Crista Cullen, who fired through the legs of Sombroek. As the half-time hooter sounded, the scores were tied at 2-2.
Dutch dominace punctured by clinical GB
After a dominant first half from the Dutch, Britain were nevertheless level on resumption. The orange and black tide continued relentlessly and after a string of penalty corners, the pressure told as a well-worked set piece saw van Male score her second of the match, to give the Netherlands a 3-2 lead.
GB held in doggedly as they looked to play out of their own half, but the intensity level of their opponents was strangling the game. The world numbers ones were happy to play out time as the third quarter ended.
The British women had 15 minutes to force a penalty shoot-out. After the frenetic opening pace of the opening half, the tempo had dropped. The red shirts then began to build up a head of steam and at a second penalty corner, Nicola White was on hand to scramble the ball into the Dutch goal for a hugley unlikely equaliser.
The GB women had been much the more clinical in front of goal, as the pendulum swung again. The game was on a knife-edge. With both sides nervy, neither ventured forward as GB forced a penalty competition.
Hinch the hero for GB
In an equally tense shoot-out, both sides missed their opening two penalties. Hinch had already saved a penalty earlier in the contest and was frustrating the Dutch one more. Bray's ran in for her penalty and was fouled by Sombroek. Helen Richardson-Walsh was given the chance from closer range and converted.
After Hinch twice more thwarted the Dutch, Hollie Webb had the chance of Olympic glory. After the Briton raced in, Sombroek was forced wide allowing Webb to flick the ball into the net and cue scenes of jubilation. The moment will go down in the annuls of British sporting history as the GB ladies become Olympic champions for the first time.