Donna Vekic of Croatia (R) and Johanna Konta of Great Britain (L) lift the trophy after their Women's Singles Final match against Johanna Konta of Great Britain during day 7 of the Aegon Open Nottingham.
Konta had been the first British woman to reach the WTA final in Nottingham since Virginia Wade in 1973, but the world number eight was prevented from becoming the first British woman to win a tour event in the UK since Wade in 1975.
Konta admitted afterwards that Vekic had outpowered her in the final two sets after a nervous start to the match.
Highlights: Konta loses to Vekic in Nottingham final
As a teenager, Vekic won her first tour tournament three years ago but had not won one since, enduring some tough times before this 2-6 7-6(3) 7-5 major breakthrough win over the home favourite, world number eight Konta.
In a thrilling 2-1/2 hour contest in which momentum switched dramatically, the hard-hitting Vekic, who is still only 20, was left feeling very emotional after a second tight tussle in 24 hours following her dramatic semi-final win over Lucie Safarova.
Vekic is probably best known now as the girlfriend of Swiss three-times grand slam champion Stan Wawrinka but in 2012, when she reached her first WTA Tour final in Tashkent, the Croat was known only as a remarkable teenage prospect in the women's game.
"It's pretty amazing. The last time I played a final, I wasn't allowed to have champagne," she told the crowd, laughing. "I'm going to drink a bottle of champagne with my team to celebrate."
Konta praises rising star Vekic after defeat
At 16, Vekic was runner-up in another Wimbledon warm-up event in Birmingham, prompting former champion Chris Evert to predict a top-10 career for the Croat but she has never come remotely near to those heights.
Yet with her 21st birthday coming later this month, Sunday's victory over Konta felt like the tennis coming-of-age for a player who had finished outside the top 100 in the last two seasons but who now reckons she has become older and wiser.
Konta, who had been hot favourite to annex her first grasscourt title, said: "She was able to continuously raise her level throughout that match and I was just not able to stay with her, so full credit to her for playing incredibly well."
Konta, who has won two finals already this year in Sydney and Miami, had been expected to become the first British woman to win a tournament on home soil for 36 years since Sue Barker triumphed in Brighton.
It all looked plain sailing as she outclassed the nervy world number 70 in the opening set but Vekic gradually relaxed and went for broke, finding the lines consistently with her bigger groundstrokes.
After Vekic had let a 3-1 lead slip in the deciding set, Konta appeared to be surging towards the title as she moved into a 4-3 lead but the Croatian held her nerve to break for a 6-5 lead and then served out for victory.
Result from the Nottingham Open Women's Singles Final on Sunday
Donna Vekic (Croatia) beat 1-Johanna Konta (Britain) 2-6 7-6(3) 7-5