Germany's Angelique Kerber pulled off a stunning victory to win the Australian Open and dash Serena Williams' hopes of clinching a record-equalling 22nd grand slam title.

Kerber was defending the Open-era best tally of her compatriot Steffi Graf and she did it playing the match of her life, beating Williams 6-4 3-6 6-4 to claim her first major title.

Completing victory after two hours and eight minutes, Kerber lay outstretched in disbelief on Rod Laver Arena, having sealed one of the biggest shocks in tennis history.

Kerber said she had "one leg on the plane home" when match point down against Misaki Doi in the opening round but now, seven victories later, she is an Australian Open champion.

Graf has become something of a mentor for the world number six and there is some symmetry that she is the first German to win in Melbourne since Graf did in 1994.

"When I played here in the first round I had one leg on the plane to Germany and now I'm here," Kerber said.

"I think I get the second chance and I take my chance to be here in the finals against Serena.

"I'm really honoured to be here and to win it is my dream come true tonight.

"My whole life I worked really hard and now I'm here I can say I'm a grand slam champion. It's crazy and unbelievable."

It is also the first time Williams has lost in eight Australian Open finals and the 21-time major champion was well below-par, making 46 unforced errors, more than double the amount of any of her previous rounds.

"Angy congratulations, you did so well, you played the best in the tournament," Williams said.

"Let me be the first to congratulate you and I hope you enjoy this moment."

Williams came into the match as heavy favourite, having won their past four meetings, but the American endured a nightmare start as 20 unforced errors helped Kerber take a surprise one-set lead.

The American tried to yell herself into life but it was like the top seed was playing with a frying pan as, to her great dismay, short forehands flew out, backhands flashed wide and one volley almost reached the backboards it was so far long.

Kerber just had to keep the ball in court and as the pressure fell on her to serve out the first set at 5-4, the German delivered as a Williams' backhand hit the net.

Williams regained some composure at the start of the second set and Kerber gave her the encouragement she needed, as two double faults gifted the American a break and 3-1 advantage.

It was all she needed as she served out with ease to force a decider.

Many times Williams has stumbled into a third set before motoring to victory but Kerber halted her opponent's momentum immediately with a hold and early break.

The crowning moment came when the American failed to put the ball away and as Kerber drove a half-volley pass into the gap, the crowd rose to their feet and the German pointed her finger to the sky.

It was the sort of point many matches would turn on but Williams is an exceptional case and she recovered immediately to break back and level at 2-2.

Kerber held and then a mammoth 11-minute game ensued at 3-2 which began with Williams taking a hit on the shoulder as the ball kicked up off the net and ended even more damaging as the German seized the break.

She played two superb drop-shots to save game points and then converted a fifth break point of her own when a Williams backhand flew long.

Kerber held but so did Williams, leaving it to the German to serve for the title at 5-3. She wavered, failing to do so as a backhand drifted out and now it was Williams serving under pressure as she trailed 5-4.

On a knife-edge at deuce, Williams dumped a forehand into the net giving Kerber Championship point.

She converted at the first time of asking as a backhand flew long and prompted the German to drop to the floor in stunned disbelief.