Gilding, appearing in his first televised final, recovered from 9-7 adrift to deny Van Gerwen a fourth UK Open crown, surviving a match dart in a dramatic deciding leg to scoop the £110,000 top prize.
The 52-year-old was beaten by Van Gerwen in the UK Open semi-finals back in 2015, but the Suffolk star avenged that defeat in style to lift the coveted title in front of a capacity crowd of 5,000 fans.
Van Gerwen produced a sublime 135 finish on the bull to establish an early 2-0 lead in Sunday's showpiece, only for Gilding to reel off four consecutive legs to seize the initiative.
The topsy-turvy nature of the contest continued as Van Gerwen replied with four straight legs of his own to regain control, converting a brilliant 130 checkout on the bull to restore his buffer at 6-4.
Gilding hit back from 9-7 down to restore parity once again, but the three-time World Champion responded with a magnificent 170 checkout to move a leg away from glory.
However, Gilding was unperturbed, pinning double 12 to force a last-leg decider, where he conjured up a brilliant 13-darter on tops to seal a famous victory, after Van Gerwen missed double 16 for the title.
"I can't believe it," admitted Gilding, who had lost all six of his previous meetings against Van Gerwen.
"I didn't expect to win that game. I played steady all weekend, but I didn't feel like I played particularly brilliant darts.
"The crowd were absolutely amazing. I have been practising more, working hard and it's paying off. Now I've got to win all of these major titles!"
Gilding's remarkable triumph catapults him into the world's top 25, and his exploits this weekend have also earned him a spot in November's Grand Slam of Darts.
Earlier in the day, he breezed through to the semi-finals with a resounding 10-4 victory against Germany's number two Martin Schindler, matching his run to the last four in 2015.
Gilding then overcame Czech youngster Adam Gawlas in the semi-finals, winning six of the last seven legs to complete a hard-fought 11-6 triumph.
Van Gerwen, meanwhile, was left dejected after falling agonisingly short in his bid to claim a fourth UK Open crown, having looked imperious for much of the 158-player event.
The 33-year-old opened his campaign with victory over Dave Chisnall on Friday, while also defeating his compatriot Martijn Kleermaker and 2021 runner-up Luke Humphries to reach the last eight.
The Dutchman then registered wins over his Premier League rivals Nathan Aspinall and Dimitri Van den Bergh on Finals Day to secure a spot in Sunday's showpiece.
Van Gerwen averaged 99 and landed nine 180s to defeat 2019 winner Aspinall 10-6 in the last eight, before defying 28 missed darts at double to celebrate a ninth straight victory against Van den Bergh in the semi-finals.
"To play games like this are always difficult. Andrew had nothing to lose and I think he played really well," conceded Van Gerwen, who was forced to settle for the £50,000 runner-up prize.
"I think I made many mistakes and I know that, but I'm the only one to blame and fair play to Andrew.
"At this moment I can't find many positives. I'm here to win tournaments and when you don't do that it's disappointing.
"It is painful for me. It hurts. Everybody knows what I'm like, but I will take it on the chin. Credit to Andrew. He had a phenomenal tournament."
Gilding's heroics dominated the headlines on an extraordinary day in Minehead, but 21-year-old Gawlas also created his own slice of history in his quarter-final win over Rob Cross.
The former World Youth finalist crashed in an incredible 12 maximums to celebrate a 10-8 success against 2019 runner-up Cross, which lifts him into the world's top 50 for the first time.
Meanwhile, Sunday's other quarter-final tie saw Van den Bergh curtail Richie Burnett's fairy-tale run, converting 53% of his attempts at double to dispatch the veteran Welshman in emphatic style.
2023 Cazoo UK Open, Sunday March 5:
- Andrew Gilding 10-4 Martin Schindler
- Michael van Gerwen 10-6 Nathan Aspinall
- Adam Gawlas 10-8 Rob Cross
- Dimitri Van den Bergh 10-2 Richie Burnett
- Andrew Gilding 11-6 Adam Gawlas
- Michael van Gerwen 11-6 Dimitri Van den Bergh
- Andrew Gilding 11-10 Michael van Gerwen