Webb, who aimed to become the first golfer to win the same tournament five straight years, fell short of the record after posting an even-par 72 in the final round to force a playoff with Sorenstam.
'It just wasn't there,' said Webb. 'I started off pretty well, but it was just one of those days where I struggled right from the go.'
The Australian got off to quick start with back-to-back birdies from the second but struggled on the back nine with bogeys at the 10th and 13th. Meanwhile Sorenstam grabbed a share of the lead with a birdie at No. 14 that moved her to 10-under.
The pressure was on Webb, who two-putted from 30 feet on the 18th to save par as the pair moved to the first extra hole.
Sorentsam had a chance to take the tournament on the first playoff hole but missed a 10-foot birdie putt.
Both players struggled off the tee on the third playoff hole. They eventually made par to move onto the fourth extra hole where Sorenstam came out on top.
'I knew how much it would mean for Karrie to win and win five in a row and make history,' she said.
Sorenstam, who opened the tournament with a 2-over 74, came from three shots back of overnight co-leader Webb en route to capturing the first event of the 2002 Ladies European Tour.
'I was three shots behind this morning, so I was chasing and I had nothing to lose and it came down to a playoff,' said Sorenstam. 'It was exciting --the slogan early in the week said 'The Main Event', so there we were. It couldn't have been any better, I enjoyed it, I enjoyed the whole week.'
Australia's Michelle Ellis (72) stood alone in third at 8-under 280 while a group of three finished in a tie for third, including Laura Davies of England, who shot the low round of the day with a 66.
'I played really well today,' said Davies, who was joined by the Swedish duo of Helen Alfredsson (68) and Charlotta Sorenstam (71) at 7-under 281.
Australia's Rachel Teske (70) was one shot further back in seventh alongside overnight co-leader Elisabeth Esterl of Germany, who struggled with a closing 4-over 76.