Sorenstam, who bogeyed the 72nd hole, finished at minus-6 after a 1-under 71. Cristie Kerr finished alone in third at 3-under-par 285, while Beth Daniel was the final player under par at 1-under-par 287.
'I can't put it into words right now because this year has been difficult for various reasons,' said Mallon, who picks up $215,000 for the win. 'It's just great. It's just absolutely great. You never know when you're going to win another golf tournament. I won last year, I think in August or September. The older you get, I hate to say it, but it just feels so much better to win tournaments.'
Mallon, the second round co-leader, started the day at Trump International Golf Club three strokes behind Sorenstam and did nothing on the front nine to make a move. She dropped a shot at the par-3 fifth, but erased that mistake with a birdie on the eighth.
Around the turn, Mallon made her move. She rolled home a birdie on the 11th and followed that with another at the 14th to move to minus-4.
She dropped her third shot within eight feet at the par-5 15th and converted that birdie try to go to minus-5, one behind Sorenstam, who birdied the same hole.
Mallon made it two in a row at 16 when she stuck her second shot within two feet for another birdie. Mallon then dropped her tee ball at the par-3 17th about 15 feet from the hole.
She rolled in that putt for birdie to get to 7 under. Sorenstam, putting on No. 16 just moments later, rolled in a birdie of her own to also get to 7 under.
Mallon closed with a two-putt par at the last, leaving it to Sorenstam, the defending champion. The Swede two-putted for par on the 17th setting up a dramatic finish.
Sorenstam, who led the tour in driving average, missed the 18th fairway. Her ball came to rest in some thick rough. She hacked her second shot down the fairway, before knocking her third to 10 feet.
Sorenstam's putt to force a playoff slid past the right edge and the win was Mallon's.
'I just felt more comfortable on the golf course,' Mallon said. 'And as the day went on, I felt better about my swing, felt better about hitting at flags and started getting good numbers, started swinging. And the back side was just awesome. I felt really, really good over the putter.
'Then that in turn turned over into my iron play and I felt like I could hit it closer to the hole. It was great fun. And I knew what I had to do. Just to play this golf course like that just feels so good.'
Sorenstam had mixed two birdies and two bogeys over her first 10 holes. She stayed in the lead with Mallon with birdies at 15 and 16, but the bogey at the last cost her a chance to win this event for the second straight year and third time overall.
'It's never fun to make bogey on the last,' said a subdued Sorenstam. 'However, I hit a tee shot and I had a really tough lie in the rough. There was not much I could do, other than hit it out and then try and make par from there.
'Today I didn't play as steady, as the other three days. I couldn't really get it going. It was just one of those days. But on the other hand, I thought that Meg played excellent today. When you shoot a low score like that on Sunday, that's the best feeling, really.'