Stadler birdied the 18th hole to get into the clubhouse at minus-9. Day rolled in a birdie putt at the 17th hole to move one clear at 10 under par, but trouble loomed in a big way for Day.
His drive on the closing hole at Irondequoit Country Club sailed left into the trees. On his second, Day tried to play a sweeping hook, but the ball came up short and left of the putting surface after it hit a patron. Day chipped to four feet, which, if made, would force a sudden-death playoff.
Day pulled his bogey putt to walk off with a double bogey and no playoff. That gave Stadler his third win on the Nationwide Tour, but his first since the 2004 season.
'It's been a crazy year, but a really good week,' said Stadler, who pocketed $103,500 for the victory. 'It was anybody's game today. I knew it had to be something really low.'
Day finished with a 2-under 68 on Sunday for second place at minus-8.
Steven Alker missed Todd Pinneo's course record by a stroke in the final round. Alker fired a 63 and tied for third place with Chad Collins (65) and second-round leader Richard Johnson (66) at minus-7.
Stadler began the final round three shots off the lead, but collected birdies at one and three. He parred his next six holes to close his front nine with a 33.
On the second nine, Stadler drained a 25-foot birdie putt, then made it back-to-back with a 20-footer at 12. Stadler ran home a seven-foot birdie putt at the 14th to reach 9-under par and tie Day, who rolled in a 12-foot birdie putt of his own at 11.
Stadler hit what appeared to be a sensational approach into the 16th green, but the ball spun back off the front of the surface. He chipped to six feet, but missed the putt to fall one back at minus-8.
Day fell down the leaderboard as well at the 13th when he could not get up and down from a bunker. Stadler drained a seven-foot birdie putt at the final hole to get in at minus-9.
Day, one behind at 8-under par, sank a 14-foot birdie putt to tie at 14. Two holes later, Day converted an eight-foot birdie putt to move into sole possession of the lead.
That was until his miscue at 18, which handed Stadler the trophy.
Stadler moved to 17th on the Nationwide Tour money list with the win, but he will not be able to play a true full-time schedule on the Nationwide Tour.
Earlier this season, Stadler captured the Johnnie Walker Classic on the European Tour and accepted a membership from that tour. He needs to fulfill a few more dates on that circuit, but will try and earn his PGA Tour card through the Nationwide Tour.
'It doesn't change much. I'll play out here as much as I can. I don't know what that's going to be,' said Stadler. 'I don't plan on taking many weeks off the rest of the year. I'll be playing somewhere.'
Jeff Quinney (65), Roland Thatcher (66), David Sutherland (66), Steve Allan (67) and Ryan Armour (68) finished knotted in a tie for sixth place at 6-under-par 274.
Overnight leader Steve Collins struggled badly on Sunday. He posted a 6-over-par 76 in the final round and fell into a tie for 33rd at 1-under-par 279.