Hornchurch hitter Lynes was defending his title for only the second time but looked assured as he dropped the local hero in the second round.
But the wily 37-year-old boxed his way back into the contest and clinched a split decision on the cards, with the judges giving it 114-113 twice to Branco, with a third scoring it 115-113 to Lynes.
The Englishman dominated the early rounds behind a sharp jab leaving Branco, who last held the title back in 2002, looking shell-shocked.
Branco went down to a combination in the second round amid claims of a clash of heads but Lynes was unable to thrust home his advantage as the Italian began to gain in confidence.
Lynes seemed happier to box on the outside with pretty combinations but it was Branco who was clocking up the rounds, being more prepared to get hit as he came forward.
The former world title challenger had his best round in the seventh, catching the champion with right hands on two seperate occasions with Lynes needing to hang on.
The right hand of Branco continued to be a success although neither fighter appeared in trouble as the fight wore on, the only difference being the local man's greater desire to go on the offensive.
The final round was a humdinger as both went for it in a big way - Branco boxing as though his career depended on it.
And it may have proved the difference as the veteran earned himself at least one more decent payday, while Lynes must now re-group having resurrected a career that was going the wrong way two years ago following successive defeats.
"I'm gutted - I felt I won it," he told Sky Sports.
"I didn't feel it was slipping away and didn't feel the need to look desperate and go at him for no reason and get caught clumsily.
"So why would they give the close rounds to him just for the sake of giving them to him? I don't know, you tell me.
"I did the cleaner work and the fans were all cheering everything he did like they would, but time will tell and people will be honest with me if they thought I won or not.
"But with the knockdown as well - what more could you do over here?"