Webb, a stroke ahead of defending champion Katherine Hull and South Korea's Lee Bo-mee entering the final round, finished at 26-under 262 on the Royal Pines course to match the tournament record she set in 1999.
Webb holed a 9-iron approach from about 125 yards for eagle on the par-4 seventh and made a 30-foot putt on No. 18 for her ninth birdie of the round. She broke the course record of 62 set last year by Kristie Smith.
Hull and Lee, bogey-free in four rounds, shot 66s to tie for second in the event sanctioned by Australian Ladies Professional Golf and the Ladies European Tour.
Webb said she thought about shooting a 59.
"When I stood on 16, I knew I had a four-shot lead, and then I was trying to work out how many under I was," Webb said. "I thought it was 10 under ... I thought I could shoot 59, but I was too tired to get nervous about it."
Webb said her fatigue resulted from the duel with Hull earlier in the round.
"Katherine was pushing me all the way," Webb said. "Just when I thought I created some breathing space, she came back with a birdie.
"I am really exhausted. On 13, I was 8 under on the day and still only had a two-shot lead. I was really starting to struggle, mentally tired. I just knew I had to dig deep and make some birdies coming in."
Hull said Webb played "flawless golf."
"It was just rock solid," Hull said. "She was swinging it well all day. I couldn't make a putt coming in, but it was just absolutely clinic golf on Karrie's part."
South Korea's Seo Hee-kyung (66) was fourth at 19 under, and compatriot Ryu So-yeon (70) followed at 15 under. American Amanda Blumenherst, the leader after the first two rounds, shot a 70 to tie for eighth, 13 strokes behind Webb.
Webb, who shot 64 on Saturday, had several threats to her lead early on the back nine Sunday. She sank a 7-footer for par on the par-3 11th after hitting her tee shot in the bunker. Hull pulled within a stroke with a 20-foot birdie putt on the par-5 12th, but Webb matched her with a 10-footer, restoring her two-stroke lead.
She took a three-stroke lead with four to play when she birdied the 14th and Hull left her birdie attempt short.
The 35-year-old Webb has won seven of the 21 Australian Masters held since 1990, and has played in 19 of them, giving her a winning percentage at Royal Pines of 36 percent. Her first win came in 1998, meaning she has won seven of the past 12.
Laura Davies, who won the New Zealand Women's Open last week for her 73rd worldwide title, finished with a 71 to tie for 25th, 18 strokes behind Webb.
Davies will defend her Women's Australian Open title next week at Commonwealth in Melbourne. She will be joined by Webb, Blumenherst and Hull in another combined Australian and Ladies European Tour event.