Yang upped the pace over the last 100 metres on the Mall to power away from Mexico's Maria Guadalupe Gonzalez and finish a mere one second clear in 1 hours 26 minutes 18 seconds, a superb triumph for the 21-year-old in her maiden senior championship.
Yet Lyu, perhaps favourite for the title, did not realise she had already received a third red card for a late infringement -- meaning automatic disqualification -- as she was still racing home just behind Gonzalez.
As she was less than 20 metres from the line believing the bronze medal was in her grasp, a race official stepped out in front of her to confirm her disqualification.
It meant that Antonella Palmisano, who had been broken by the leading trio just as they started the last of the 10 two kilometre loops between Admiralty Arch and Buckingham Palace on The Mall came home for the bronze in 1:26.36, Italy's first medal of the championships.
The result was tough on former boxer Gonzalez, who had also missed out on gold at last year's Rio Olympics by just two seconds.
(Reporting by Ian Chadband, editing by Pritha Sarkar)
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