Marquez, who had put his works Honda on pole position for the 10th time this season, lost out to Lorenzo at the start but seized back the lead from Yamaha's double champion with seven laps to go.
Lorenzo was not about to give up, going back in front two laps later when Marquez ran wide at Stowe.
That was not the end of it, with Marquez then barging through three laps from the end with the machines touching and almost locked together. The pair crossed the line just 0.732 of a second apart.
Italian Valentino Rosso, making a record 246th start in the top category, finished third on his Yamaha after another enthralling battle with Honda's Dani Pedrosa and Ducati's Andrea Dovizioso.
Marquez, who has been beaten just once this season when he was fourth in the previous round in the Czech Republic, now has an 89 point lead over team mate Pedrosa - the winner in Brno but fourth at Silverstone.
Marquez has 288 points, Pedrosa 199 and Rossi 189.
"Jorge was much stronger than I expected before the race," Marquez, who was beaten by Lorenzo in last year's race, told BT Sport television.
"When I passed him the first time I expected to open a small gap but I did a small mistake and he came back. The battle was nice," he grinned.
Honda have won every race this season but Lorenzo took Yamaha closer than ever to the top step of the podium and felt he had done all he could after giving his all.
"Marc was the favourite for this race but racing is racing and sometimes you get a surprise," said the Spaniard, who led into the first corner.
"I rode better than ever but it was not enough because at the moment the Honda is very good even if our bikes have improved.
"Obviously this action with the touch cost me half a second, but anyway I was so tired by pushing at the limit and the rear tyre was destroyed."
(Reporting by Alan Baldwin, editing by Pritha Sarkar)
Share
