“Ding seemed to have a risk-free chance to push for a win, but instead liquidated into a pawn-down endgame,” Chess.com wrote in its post-game summary.
“It should have been drawn, but Ding blundered as the pressure grew.”
He resigned three moves later. Dommaraju promptly burst into tears as the room erupted with cheers.
“I probably got so emotional because I did not really expect to win that position,” he said.
At age 18, he is only the second Indian player to become world chess champion, after five-time world chess champion Viswanathan Anand who last won in 2012.
“It’s a proud moment for chess, a proud moment for India… and for me, a very personal moment of pride.”
Indian Prime Minister Narendra Narendra Modi was also among the first public figures showering praise.
“Historic and exemplary!” he wrote on X. “Congratulations to Gukesh D on his remarkable accomplishment. This is the result of his unparalleled talent, hard work and unwavering determination.”
The FIDE World Chess Championship carries a $2.5m (£1.96m) prize fund.