The Aussies set their rivals a victory target of 143 runs in Colombo.
At one stage their reply stuttered when they were reduced to 63-4. However, they got themselves back into contention and required 16 off the final over to claim the trophy.
They were only able to amass 139 from their 20 overs though, which left them four runs short.
Captain Charlotte Edwards, who was voted player of the tournament, said: "I'm very proud of them. For the last 18 months, we've worked towards this - the character of our team showed towards the end.
"We didn't bowl well enough up front and then lost too many wickets - it wasn't our day but Australia were the better side. I wouldn't change my decision to bowl first as we saw the girls at the bottom of the order can hit the ball out of the park.
"Thanks to all our supporters and sorry we couldn't bring the trophy home. It's been a great spectacle for women's cricket, which was the main thing, and the best team won."
Australia had gone into the tournament in Sri Lanka as the holders.