The French teenager, ranked No 16 in the world, won 6-1, 3-6, 6-4 to record only her second success over a world top 10 player - the first was on Tuesday when she beat the Argentinian, Gabriela Sabatini.
'I'm so happy I just can't believe it,' said the unseeded 18-year-old, who repeatedly punished the former world No 1's vulnerable second serve.
Navratilova, 37, seeded No 3 and a finalist in the past two years, twice had a break point in the third set, but Pierce survived and won on her second match point.
In the semi-finals, Pierce will face the winner of the match between the second-seeded Spaniard, Arantxa Sanchez Vicario, and Jana Novotna.
Steffi Graf assured herself of the most lucrative women's season in history after a 6-1, 6-2 win over the South African, Amanda Coetzer.
The German's victory took her tournament earnings to dollars 2,624,337 ( pounds 1.76m) and she can now add another dollars 97,000 by clinching her third Virginia Slims title. Graf now faces either Spain's Conchita Martinez, or her compatriot, Anke Huber.
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