The winner of 167 singles and 166 doubles titles, the 45-year-old Navratilova asked for a wild card into this grasscourt event in which she is an 11-time champion.
"Eastbourne has always been good to me and it was again for me today," said Navratilova, whose last singles match was a loss to Gabriela Sabatini in the first round of the WTA Championships in 1994.
The 25-year-old Panova appeared nervous facing the legendary Navratilova. After Navratilova double-faulted twice to lose serve in the opening game, she won the next six games using her trademark net-rushing tactics as Panova committed a series of errors.
Panova settled down and made Navratilova pay for rushing the net in the second set, breaking serve to lead 2-0 with a winning pass. She closed out the set when Navratilova hit an easy backhand into the net.
Navratilova changed her strategy a bit in the third set, patiently playing the baseline and broke Panova's serve in the fifth game. When she broke again for a 5-2 lead, Panova appeared deflated and Navratilova served out the match.
After Panova hit a weak backhand into the net to end the match, Navratilova raised her arms in celebration.
Navratilova came out of retirement in 2000 to play doubles and last month won the doubles title with Natasha Zvereva at the Madrid Open.
The nine-time Wimbledon champion took a late singles wild card into this event on a dare by her trainer, Giselle Girado.
Yugoslavia's Top-seeded Jelena Dokic of Yugoslavia, who received a first-round bye, won her second title of the year and her first career grasscourt crown Sunday at Birmingham.