In what was a true game of two halves in front of an 83,000-strong crowd, England broke the deadlock through Ella Toone, but Brazil came out all guns blazing after the break and dramatically levelled in added time through Andressa Alves to force spot kicks.
Toone could not replicate her feats from the spot as she fluffed her lines in the shootout, but Rafaelle and Tamires both missed for Brazil as Sarina Wiegman's side lifted the trophy aloft.
In typical Lionesses style, England enjoyed the lion's share of possession from the first whistle, but Brazil number one Leticia Santos was afforded adequate protection from her backline in the earliest exchanges.
Santos's first action of the game was to keep out a low drive from Lucy Bronze in the 14th minute, as the skipper attempted to pick out the far corner from long range following a mazy run from Lauren Hemp.
However, a scintillating passing move from England in the 23rd minute deservedly led to the opening goal, and the omnipresent Bronze was unsurprisingly involved, advancing into the penalty area and cutting back for Toone to sweep home from 12 yards.
Pretty soon, the ever-dangerous Lauren James wanted a slice of the action, and the Chelsea winger fired into the roof of the net from Bronze's ball over the top in the 29th minute, but the offside flag belatedly went up.
Despite a few fleeting signs of danger from Brazil during England's sloppy moments in possession, Wiegman's side were firmly in control against the South American champions and spurned a couple of chances to double their lead just before the break.
James continued to cause the Brazil backline a world of problems on the left and sent in a floated cross for Hemp in the 42nd minute, but her header was meat and drink for Santos, who also got down low to keep out Alessia Russo's first-time effort one minute later.
Brazil boss Pia Sundhage responded at half time by switching to a more attacking formation - scrapping the three central defenders - and it worked a treat as the South American champions immediately pushed England back in the second 45.
Barcelona forward Geyse ran the show for Brazil on the right, and the 25-year-old should have assisted the visitors' equaliser in the 56th minute after some sublime trickery on the right, but the unmarked Adriana failed to connect with her colleague's cutback into the area.
Just three minutes later, Geyse was inches away from levelling matters herself after Toone gave the ball away under pressure, but Mary Earps got a strong hand to her long-range attempt, which also clipped the crossbar on its way behind.
Having survived that early onslaught, England showed a bit more endeavour in the Brazilians' half, as Santos dived to parry away Georgia Stanway's 20-yard strike in the 67th minute.
Wiegman's side would need only survive five minutes of added time to add another piece of silverware to their cabinet, but in the third additional minute, Brazil finally nabbed the equaliser that their second-half performance warranted, albeit thanks to a catastrophic error from Earps.
Adriana sent in a cross from the right, which Earps would seemingly gather with ease, but the England number one spilled the ball right into the path of Alves, who could not miss from a couple of yards out to send the tie to penalties.
Stanway and Adriana converted their nations' opening spot kicks, but Santos guessed correctly to save from Toone, whose blushes were then spared by an even better stop from Earps to keep out Tamires.
After Rachel Daly fired home, Arsenal centre-back Rafaelle struck the crossbar, allowing Alex Greenwood to put England one kick away from victory with a confident penalty into the corner.
Kerolin did what she needed to do for Brazil - sending Earps the wrong way - but she had only delayed the inevitable, as Euros hero Chloe Kelly stepped up to net the winning penalty for the Lionesses and send the home crowd into delirium.