Australia scored 142-4 and restricted England to 138-9 at R. Premadasa Stadium.
"(I'm) so proud of this team," Australia captain Jodie Fields said. "England played a really good match but we had the belief in our team."
Jess Cameron top scored with 45 off 34 deliveries for Australia. She hit one six and five boundaries after England captain Charlotte Edwards made Australia bat first.
England started well but lost three middle order wickets for 25 runs, going from 61-2 to 86-5 after 13.5 overs. Edwards top scored for England with 28 from 23 deliveries including a six and four boundaries.
Needing 16 runs off the final over, England fell four runs short.
"I wouldn't change the decision to bowl first," Edwards said. "It still came down to six off the last ball. It wasn't to be a fairy tale but (I) hope we have done the country proud."
Australia's left-arm spinner Jess Jonassen picked up three for 25, her career-best bowling figures, surpassing 2-28 recorded against New Zealand earlier this year. Offspinner Lisa Sthalekar and seamer Julie Hunter also picked up two wickets each.
Offspin bowler Holly Colvin got 2-21 for England.
Cameron was named player of the match and Edwards was given the player of the tournament award.Suggest a correction