The 30-year-old from Inverness, who is based in the United States, carded a final round four-under-par 68 for 20-under 268 to win by two shots from American Kevin Kisner.
Danny Willett was a further shot back with fellow Englishman Ross Fisher after a barnstorming closing round of 62 to close to within spitting distance of Rory McIlroy in the European Tour's Race to Dubai.
McIlroy, recovered from a nasty bout of food poisoning, finished tied 11th after a fine six-under 66. World number one Jordan Spieth could not mount a sustained challenge with a last day 70 to tie for seventh.
The 20-year-old Li was looking to become the first Chinese player to win a PGA-Tour sanctioned event and only one shot back going into the final round had a realistic chance.
But he endured a horrible start on the Sheshan International course with a bogey and double bogey seeing him plummet down the field.
Playing alongside two-time major winner Spieth, he drew a huge gallery and was cheered to the rafters when holing a chip from off the green at the ninth to salvage par.
Two birdies in the final three holes and another superb recovery shot after finding the water on the 18th saw Li back to level par for his round and on level terms with his illustrious playing partner at the finish of a memorable week.
His tied seventh was the best by a Chinese player in a PGA event.
But it was Knox who was to set a series of firsts for himself. His first win at this level and the first Scotsman to win a World Golf Championship event.
"I always thought I would win a big one, " he said. "This is going to take a long time to sink in."
He had elected to complete his final hole of the third round Sunday after bad light had brought play to a premature close the night before.
A birdie drew him level with the unheralded Kisner at 16-under, but behind a host of big names, including Spieth, three back after a third round 63, and fellow American Dustin Johnson were poised to challenge.
South Africa's Branden Grace, Fisher and the charging Willett were also in contention for victory in the $8.5 million event and at one point five men shared the lead.
But Knox carded successive birdies on the 10th and 11th to go clear again and an insurance birdie on the 16th gave him a comfortable lead as he tackled the par-five 18th.
He played it safe to make par and land the prestigious tournament, the first debutant to win a WGC tournament since Jeff Maggert in 1999.
McIlroy, usurped by Spieth from the top ranking this year, will now look to retain his status as Europe's number one in the finale to the season in Dubai later this month.