The German was given a stern examination in the first set but clinched it before the Italian punished some indecision to take control of proceedings, winning the second set on a tie-breaker.
Lisicki, a former Wimbledon finalist, struggled to find her serve in the decider and was forced to deny Pennetta from winning the match on three occasions before belatedly discovering her serve and rallying to a thrilling 6-4 6-7 (3-7) 7-6 (7-4) victory.
Lisicki won 75 per cent of her first-serve points and broke Pennetta four times in the first career meeting between the two.
“In matches like this both players played unbelievable points. It was fun to be part of a match like this,” said Lisicki, who holds the WTA record for the fastest serve – a 131 mph (210.82 kph) blast she struck last year in Stanford.
Pennetta had hoped to repeat her surprise victory of last year, and managed to save one match point before running out of gas.
Lisicki, the 24th seed, needed two hours and 40 minutes to fashion the victory, which set up a clash with another former champion, Serb Jelena Jankovic.
“Everything happened tonight,” Pennetta said. “Match point for one, match point for the other one.
“Tennis is like this. I’m happy about the match, but of course I am upset, because when you are there, you want to win it.”
Jankovic was leading opponent Lesia Tsurenko 6-1 4-1 when the unseeded Ukrainian was forced to retire due to an ankle injury.