In the longest match of the tournament, which tested the physical and mental strength of both the players, Sindhu lost 19-21 22-20 20-22 after battling hard for one hour and 49 minutes.
Their bodies were falling apart as the match progressed but both Sindhu and Okuhara used every ounce of energy left in them to make it an epic contest.
After closing the second game by winning an incredible 73-shot rally, Sindhu saved one championship point in the decider but it was the Rio Olympic bronze medallist who had the last laugh.
India had one silver and four bronze in the World Championships before this edition.
More From This Section
Prakash Padukone was the first Indian to win a medal when he took a bronze in the men's singles in 1983 before the women's doubles pair of Jwala Gutta and Ashwini Ponnappa bagged another bronze in 2011.
Rio Olympic silver medallist Sindhu came into the match with a 3-all head-to-head record against Okuhara. But the Indian had an upper hand in their last two meetings -- Rio Olympics and 2017 Singapore Open.
The Indian used her height to good use, retrieving the shuttles quickly and started using her cross court returns to trouble the Japanese.
Sindhu showed good anticipation and used deception well to move to a 13-8 lead but the pint-sized Japanese changed gears and started dictating the rallies. She first clawed back to 14-14 when Sindhu faltered with her return serve before grabbing the lead.
Sindhu, then sent one to the net to hand over the game point to Okuhara, who pocketed the opening game when the Indian hit long.
After the change of side, Okuhara struggled to control her lifts and also miscued a few shots as Sindhu led 5-1 when her rival's smash found the net. Sindhu made some sound judgements at the baseline and tried to be patient on the court to extend the lead to 9-3.
A net error stopped Okuhara's run as Sindhu eventually held a 11-8 lead at the interval when her rival again went wide.
At 15-13, another exceptional rally unfolded with Sindhu making the Japanese run to the deep corners and even though Okuhara made some remarkable retrieves she miscued a shot at the forecourt as Sindhu led 16-13.
Okuhara brought more power to her smashes to breach Sindhu's defence and created acute angles with her wrist to reduce the margin to 16-17. Two backhand returns and a block at the net helped Sindhu move to 18-16. An extraordinary net return gave her another point and she grabbed the game point when Okuhara went long.
What ensued next was a 73-shot long and exhausting rally which Sindhu managed to win when Okuhara's return found the net and she collapsed on the ground, drained completely.
In the decider, Okuhara opened up a 5-1 lead early on as Sindhu looked a tad exhuasted but some clever returns near the net helped the Indian claw back at 5-5. The momentum shifted again in Indian's favour as she started dominating the rallies and reached the break at 11-9 when Okuhara hit wide.
They moved neck and neck till 17-17 before the Indian grabbed a 19-17 lead when Okuhara hit wide. The Japanese produced a perfect cross court reverse slice and then unleashed another cross court smash to once again level par.
A net error from Sindhu handed a match point to Okuhara but the Indian saved it after winning another long rally, following a bad leave at the baseline by Okuhara.
Sindh had reached the final after beating World No 10 Chen Yufei, late last night.