Playing on American soil, the Canadians used superior penalty-killing and a buzzer-beating goal by Jayna Hefford to claim the only hockey prize that had eluded them during 12 years of unparalleled achievements.
American referee Stacey Livingston called 18 penalties, including 12 on Canada.
"The calls went against us, but we said, `Oh, well, another challenge,'" Canadian defenseman Therese Brisson said.
While the United States scored both of its goals on the power play, it squandered seven other chances. Canada failed to produce a power-play goal, but it got an incredibly well-timed one from Hefford.
Protecting a 2-1 lead with time running out in the second period, Canadian defenseman Becky Kellar threw a long pass from deep inside her own zone that hit Hefford just as she was crossing the American blue line.
Hefford broke in alone on Sara DeCosta, who made a lunging attempt to poke away the puck. But it flipped up and over the goaltender and into the net for what turned out to be an insurmountable two-goal cushion.
"It's a huge goal," Canada's Tammy Lee Shewchuk said. "We knew we had the knife in the heart of the Americans and we knew we had it."
Kim St.-Pierre surrendered a late goal to Karyn Bye, but held on down the stretch and was bowled over by teammates at the final buzzer.
The Canadians have won all seven World Championships, but lost to the United States in the gold medal game of the inaugural Olympic tournament four years ago in Nagano.
"We remembered the feeling from Nagano," Canada's Jennifer Botterill said. "We faced the challenges and made each game better."
The loss ended a 36-game winning streak for the United States, a run that included eight victories over Canada leading up to the Olympic tournament.
"This is the only one that counts," Canadian captain Cassie Campbell said.
"The key for us when we went 8-0 against them during the season was always our special teams," said U.S. captain Cammi Granato. "We certainly had our chances a man up in this game, we just didn't put it in."
The Americans had not trailed at any point in their first four games of the tournament. But Canada took the lead just 1:45 into the first period when Caroline Ouellette put a rebound past DeCosta.
The United States tied it early in the second on Katie King's power-play deflection, only to have tournament most valuable player Hayley Wickenheiser put Canada back in front just 2:11 later.
Then came Hefford's back-breaker.
"After they got that goal at the end of the second period, you're almost playing for overtime," U.S. coach Ben Smith said.
Canada was not the only team with reason to celebrate Thursday as Sweden earned the bronze medal with a 2-1 triumph over Finland.
With Swedish organizers unsure they could field a competitive team, players did not learn until late December that they would be going to Salt Lake City. They made the trip worth it by recording the country's best-ever finish in women's international competition.
Kim Martin stopped 32 shots and Evelina Samuelsson scored a pair of first-period goals, helping Sweden avenge losses to the Finns in the bronze medal games at the inaugural World Championship in 1990 and the 2000 Four Nations Cup.
"I'm just so happy," Swedish defenseman Anna Andersson said. "I'm just so happy. And for women's hockey in Sweden, I think it means a lot because we don't have that many players. I just hope that some more girls will start playing."
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