Deng, herself world champion on the apparatus in 2009, gave China their fourth gymnastics gold medal of the Games, an hour after Feng Zhe had won the parallel bars title.
Sui, competing first, pulled off a difficult routine but cried on her coach's shoulder after Deng surpassed her by 0.1 points with a score of 15.600 at the North Greenwich Arena.
Aly Raisman snatched the bronze medal from 2004 champion Catalina Ponor of Romania on a tiebreak after the judges increased the difficulty element of her score following a review requested by the United States team, upping her final mark.
While Ponor, who came out of retirement last year, left the arena stony-faced after being demoted to fourth, the American was all smiles having just missed out on all-around bronze because of the same tiebreak rule last Thursday.
Introduced at the behest of the International Olympic Committee (IOC) to rule out double medals, the system takes into account execution scores to separate two gymnasts who accumulate the same total. The rule gave the edge to Raisman by 0.3.
Deng was part of the Chinese line-up who won team gold in Beijing four years ago and who faced allegations of fielding under-age gymnasts, charges the 2008 hosts denied.
The 1.46-metre gymnast, whose age is officially given as 20, produced a routine full of difficult combinations, finishing with two backflips, a double-pike dismount and a huge smile as she saluted the judges.
She said the gold medal compensated for disappointment in the team event when she fell from the beam and China finished fourth.
"After the team event I was depressed," she told reporters through an interpreter. "Motivation for this event came from my coach and other team mates so I was able to recover and prepare for this."
American Gabby Douglas, who dazzled to win the all-around title here, finished seventh after missing her footing on a half-turn and swinging underneath the 10-centimetre wide beam before falling off.
All-around silver medallist Victoria Komova also came off, remounted and then sat down on landing. She finished last of the eight finalists, with 13.166.
Komova, daughter of 1985 world team champion Vera Kolesnikova, told reporters: "I was not very lucky at these Olympics. I failed them 100 percent.
"I don't know if I will continue sports," added the 17-year-old, who cried after finishing second in the all-around and team events last week.
"I will go back home take some time off and think through the situation. My parents say everything is okay, but I don't feel that."
Larisa Iordache, who helped Romania to win team bronze, came into the final as a replacement for injured compatriot Diana Bulimar but she also fell, toppling off the end of the apparatus as she finished sixth.