The Briton, who is 41 next month, took the lead with just over a lap to go and held off the challenge of Frenchwoman Clemence Calvin to snatch her first major championship title.
Pavey, silver medallist in Helsinki two years ago, finished in 32 minutes 22.39 seconds, more than a second ahead of Calvin.
Laila Hmatou Traby of France was third.
"To try for so many years and to finally do it at the age of 40 is funny really," the winner told the BBC. "I should have learned how to do it by now.
"I was feeling tired but I had to try and keep relaxed and remind myself that everyone else might be feeling the pace."
Irina Khabarova, the previous oldest female gold medallist, was 40 and 27 days when she was a member of Russia's 4x100 relay-winning team in 2006.
In the evening's other final, world champion David Storl of Germany won the men's shot put with a throw of 21.41 metres.
Spain's Borja Vivas was second with 20.86 followed by 2008 and 2012 Olympic champion Tomasz Majewski of Poland on 20.83.
(Writing by Brian Homewood, editing by Neville Dalton)
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