Doolan, 32, had shot the low round of the day over the Country Club of the North, a bogey-free 64, to finish early on the mark of 12-under-par.
She was then joined by first-round leader Wendy Ward, who, playing in the last group of the day, followed up a first-round 64 of her own with two late birdies over her last four holes to finish with 68 on minus-12.
Starting at the par-4 1st, both players recorded scores of par, and then bogied the second, birdied the third and parred the fourth.
Doolan finally managed to get the edge on Ward, as she rolled in a birdie putt at the par-4 5th for the win.
Beth Daniel and Maria Hjorth poured in scores of 65 to finish one stroke shy of the playoff at 11-under, while Janice Moodie (66) and Dottie Pepper (67) ended two back at 10-under.
Defending champion Annika Sorenstam closed with a 66 to claim a tie for seventh with Tina Barrett (64) and Mhaira McKay (66).
Originally slated for 54 holes, Fridays opening round of the Champions Classic was cancelled due to torrential rains, forcing tournament officials to shorten the event to just 36.
No problem for Doolan. Prior to this week, her best finish on the LPGA Tour had been a second-place finish at last years Wegmans Rochester International.
Her best showing this year had been a tie for tenth at last weeks Electrolux USA Championship.
With the victory, she managed to collect the largest payday in her playing career at $112,500.
Full-field scores from the Champions Classic