Top seed Nikolay Davydenko prevailed over France's Paul-Henri Mathieu 7-5 7-6 in the men's final later in the day to retain his crown and complete the Russian double at the $2.3 million indoor tournament.
Davydenko, who called for a medical timeout late in the second set to treat his right wrist, needed four match points to finish off the fourth-seeded Frenchman for his third victory in Moscow in the last four years.
The Russian, who won his first title of the year, said he was one point away from defaulting.
"Honestly, I was pretty lucky to win the tiebreak," said the world number four, who saved seven set points in the tiebreak.
"I had a lot of pain in my wrist, so I would've quit, no doubt, if had lost that second set."
A visibly disappointed Mathieu, who won his first career title here in 2002, had his chances.
"I had two set points at 5-4 and 15-40 on his serve in the first set and if I had won that set it might have been a different story," he said. "In a match like this, it's always two or three points that make a difference."
STORMING DEMENTIEVA
Dementieva, who turns 26 on Monday, came out storming after losing the first set, breaking the fourth-seeded American three times in each of the next two sets to claim her first career win over the former world number one in emphatic fashion.
The 14th-ranked Russian had not even won a set off Williams in their four previous meetings.
Both players traded breaks several times in the first set before Williams broke to love in the 12th game to take a one-set lead.
The Muscovite, seeking her first title on home soil in her 11th Kremlin Cup appearance and after losing her two previous finals here in 2001 and 2004, came out fighting in the second set.
Urged on by a near capacity 10,000-strong home crowd, she broke the world number seven three times to claim the second set in just 24 minutes before repeating the feat in the decider.
Serving for the match, Dementieva was able to overcome her nerves to clinch a breakthrough victory and the $182,000 first prize on her second opportunity when Williams's forehand sailed wide.
"It's just a great victory for me," the Russian told reporters after winning her eighth career title.
"This has been one of my favourite tournaments and playing at home in front of my fans, finally I was able to do it. It is a very important win for me and my whole career."
"She just played really unbelievable, she should play like that more often," said Williams, who was making her second visit to Moscow 10 years after her debut when she lost in the first round as a 16-year-old.
"I'm not going to make excuses for myself. I played terrible. I had a feeling that almost every shot I hit, it was out," added the Australian Open champion, who committed 59 unforced errors to her opponent's 31.
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