Lin's win was his fifth world championship and China's sixth consecutive one in the men's singles but their proud run in the women's event ended.
Ratchanok, 18, beat Li 22-20 18-21 21-14 in Guangzhou, China, to become the first Thai to win the world championship and first non-Chinese woman since Denmark's Camilla Martin lifted the title at home in 1999.
World number one Li led 19-12 in the opening set but Ratchanok came storming back to take it 22-20, the first set the Chinese had dropped all week.
Ratchanok nudged ahead 15-14 in the tight second before Li recovered to force a decider which the Thai was always in control of.
Her victory comes weeks after Thailand suffered its darkest day in the sport when former doubles partners Maneepong Jongjit and Bodin Issara brawled on court in the final of the Canadian Open, leading to lengthy bans.
In the first final of five at the Tianhe Sports Center on Sunday, controversial duo Wang Xiaoli and Yu Yang, who were kicked out of the London Olympics in the play-to-lose scandal, claimed the women's doubles title over Jang Ye-na and Eom Hye-won of South Korea.
The Chinese top seeds won 21-14 18-21 21-8 to retain the title they won in London two years ago in what home fans had predicted would be the first of four titles for the world's most populous nation.
However, Ratchanok then beat Li before Chinese top seeds Chen Xu and Jin Ma were beaten 21-13 16-21 22-20 by Tontowi Ahmad and Liliyana Natsir of Indonesia in the mixed doubles.
Mohammad Ahsan and Hendra Setiawan followed their compatriots by claiming the men's doubles title with a comprehensive 21-13 23-21 win over Danish pair Mathias Boe and Carsten Mogensen in 33 minutes.
That brought Lin and Lee to the court for the showpiece men's singles and the old rivals served up another classic encounter.
It was nip and tuck in the first set between the duo, who contested the Olympic final last year, with Lee breaking out from a 13-13 tie to take it 21-16.
Olympic champion Lin wasted little time levelling the contest as he raced ahead 12-1 in the second set thanks to a run of seven consecutive points.
Lin wrapped it up 21-13 to make it one set all but Malaysian media were unhappy, reporting that the air conditioning had been switched off in the venue by the Chinese organisers to Lee's disadvantage.
Lee, though, took a 10-6 lead in the third set and looked on course to claim a first world championship title after many years of near misses, only for Lin to storm back.
The Chinese, known as 'Super Dan', went ahead 20-17 before Lee called it quits to leave Lin celebrating a fifth world title.
(Reporting by Patrick Johnston in Singapore; Editing by Clare Fallon)
