Julia Mancuso, silver medallist in Wednesday's downhill won by US team-mate Vonn, was second again and Sweden's Anja Paerson, who decided to compete only at the last minute after a heavy crash the day before, battled to bronze.
Paerson equalled Croatian Janica Kostelic's women's record of six Olympic medals in Alpine skiing while Mancuso is now level with Bode Miller as the US skier with most medals.
"It's incredible, you always try to have positive thoughts and believe you can come back strong," said Riesch, a close friend of Vonn's and the slalom world champion who turned the tables after flopping in Wednesday's downhill. She beat Mancuso by 0.94 seconds.
"I was not nervous and that was the key because yesterday I was. It was a course to attack because it was not so difficult and the coach told us to just attack it full gas."
Vonn was fastest in the morning's downhill but would have had to produce something special to hold off Riesch. Instead, she snagged a gate in the slalom, lost a ski and went out thumping the snow in frustration.
"I'm disappointed but I went down fighting," said the golden girl of US skiing, who has been centre stage since she arrived in Vancouver with a shin injury. "Maria and Julia put in good runs so I knew I had to put in my all.
"I tried as hard as I could, it just didn't go my way".
Mancuso, who lay on her back like a beetle in the finish area to waggle her skis in the air in jubilation, could not believe her success.
"So far, so good," she said. "It's awesome. Seeing the leaderboard after crossing the finish line having made a couple of mistakes, I didn't believe it. It's just been an incredible week."
Paerson, who had been only 50-50 to start on Wednesday night after a spectacular crash off the final jump in the regular downhill, was only seventh after the opening run.
She raised her hands in the air and clenched her teeth as she crossed the slalom finish, slapping her bruised thighs at a job well done.
On Wednesday she had ended up on her front on the snow, grimacing in pain. A day later, she willingly dived face first again - this time in delight at an unexpected medal.
"I was pretty scared this morning," she said. "It hurt a lot but I didn't want to miss out on an event. I am a fighter and you have to keep on smiling."
Riesch's gold medal was the first by a German in Alpine skiing at the Olympics since Katja Seizinger and Hilde Gerg won three titles between them at the 1998 Nagano Games.
Britain's Chemmy Alcott equalled her best Olympic performance when she finished 11th. The 27-year-old Londoner produced an impressive slalom to climb seven places after what she described as a poor downhill.
"I had no pressure on me from the poor downhill, so it was easier to pull out a good slalom. Ten years ago I was a good slalom skier so I tapped into that confidence," she said.
Place of birth: Garmisch-Partenkirchen, Germany
No previous Olympic results:
Gold medallist, 2009 World Championships, slalom
Champion, 2008/09 World Cup, slalom
Champion, 2007/08 World Cup, super-G
Champion, 2007/08 World Cup, super combined
Runner-up, 2008/09 World Cup, overall
2x Third place, 2007/08, 2003/04 World Cup, overall
This season's World Cup slalom leader, Riesch, won her first Olympic gold at her debut Games in Vancouver.
She started skiing at the age of three and was also a nationally ranked tennis player. Her sister Susanna is also a member of the German Alpine skiing team.
The German is close friends with American all-rounder and Alpine skiing rival Lindsey Vonn and the pair often spend Christmas together with Riesch's family.
The 25-year-old ruptured knee ligaments in 2004 and missed the remainder of the 2003/2004 season. She also missed part of the following season after dislocating her shoulder.
She missed out on the 2006 Winter Olympics in Turin after she required knee surgery following a fall in which she tore ligaments.
Riesch then injured knee ligaments again in training before the 2009 World Championships. She recovered to win the world title.