Stiles entered the round with a four-shot lead on the field, but trailed by one stroke heading to the 18th hole. He tied it with a par while Putnam made bogey from a bunker.
The duo finished 72 holes at 13-under-par 267 -- Stiles after a 1-over 71 and Putnam following a wild 3-under 67 that included just six pars.
'It was a battle,' said Stiles, who claimed his fourth Nationwide Tour victory. 'I just hung tough, that's all I can say about it.'
Back at the par-4 18th for the playoff hole, Putnam found the fairway with his tee shot. Stiles hit a tree, but received a bit of good luck when it spit his ball back on to the fairway.
Stiles then knocked his approach over the green and into the bunker where Putnam made bogey moments earlier. But Putnam's ball also found sand again in a bunker right of the green.
From there, Putnam hit an average bunker shot within 10 feet. Stiles then seized the moment by blasting to within 3 1/2 feet.
After Putnam blew his par putt past the hole, Stiles drained his for his first win since the 2002 Knoxville Open.
'Michael played great today. It came down to the end, and it was just a battle of short games, I guess,' said Stiles, 32.
Stiles was lucky to come away with the victory after playing his front nine at 3 over. He got two of those shots back with birdies at 10 and 11.
Putnam, 22, recovered three shots on Stiles and took the lead during a fantastic three-hole stretch.
After playing his first 10 holes at even par, Putnam pulled within one shot of Stiles' lead when he eagled the par-5 11th to get to 12 under. He birdied No. 12 on a 20-foot putt to tie his playing partner, then chipped in for another birdie at the par-4 14th to take a one-shot lead at 14 under.
The good run ended for Putnam with a bogey at the par-3 15th, which dropped him into a share of the lead again at minus-13.
Stiles was busy parring holes after collecting his only final-round birdies at 10 and 11, leaving Putnam an opportunity to take the lead again with another birdie.
Which is what happened at the par-3 17th, where Putnam rolled in a long birdie putt to get back to 14 under. Stiles scrambled for par at 17 from a greenside bunker.
At the 18th, Putnam's approach found the bunker behind the green and Stiles hit into the intermediate rough. After Stiles chipped within 3 feet -- setting up a putt he would eventually make to force the playoff -- Putnam blasted 20 feet past the hole on the way to his bogey.
Deane Pappas finished alone in third place at 10-under-par 270 after a final- round, 1-under 69. David Hearn shot a 68 and was one stroke further back in fourth.
Erik Compton, Glen Hnatiuk, Cliff Kresge, Johnson Wagner and Jay Delsing tied for fifth place at 8 under.
Just one week after the death of his father, Delsing played in the final group with Stiles and Putnam. He closed with a tough, 2-over 72.