The 23-year-old Spaniard claimed a 7-5, 6-0 win over the 37-year-old five-time champion after saving two set points in the opener.
She is just the second Spanish woman to win a Wimbledon singles title, following her coach Conchita Martinez in 1994.
Williams was looking for her sixth Wimbledon title - and eighth Grand Slam trophy - in the final.
However, losing to the younger Williams sister, Serena, in the final two years ago clearly helped Muguruza, who said that experience helped her remain calm, a resolve that showed practically all tournament. Of course, I'm excited about being again in another final, trying to take it a step further. This is the second Grand Slam of Muguruza's career, as she has proven to be an adept player on both clay and grass.
Garbine Muguruza won a battle of the generations by thrashing Venus Williams to secure her first Wimbledon title. In the very first game, Venus was pushed on her serve but in typical fashion, she came out fighting to hold. And in response to some of Williams' ventures to the net, Muguruza was able to use an accurate backhand to foil the American.
As tensions rose, so too did the quality with Muguruza seizing the opening set after 51 minutes.
Muguruza has also appeared in the final at Wimbledon before, in 2015, when she was beaten by Venus's sister Serena.
Pressed on whether her 20th Wimbledon attempt was not her last and that she would be back next year, Williams answered: "Presumably, yes".
"I tried my best to do the things you do - but I think there will be other opportunities".
Muguruza, seeded 14th, has dropped down the rankings in recent months after struggling to sustain the form she showed to win last year's French Open. I know how hard you work.
For the tournament, Murguruza only dropped 44 games, the least in the event.
"I'm just going to try to get better every day and hopefully the results will come", Liu said.