The 15-year-old took the women's title by a slender margin of just 1.31 points from her friend, compatriot, training partner and arch rival Evgenia Medvedeva.
In bronze came Canada's Kaetlyn Osmond.
Zagitova beat two-time world champion Medvedeva despite both scoring matching 156.65 points in the free-skating Friday
Zagitova's world record short program score of 82.92 a day earlier made the difference, giving her a combined total of 239.57.
Medvedeva, skating last, was not at her supreme best, and crumpled into the arms of her coach in tears after her routine earned 156.65 for a total of 238.26.
The gold and silver Olympic Athletes from Russia medalists were later seen embracing in a warm hug.
The two ice princesses were among the 168 athletes from Russia who passed rigorous testing to compete as neutrals in South Korea after Russia were banned over state-sponsored doping.