SYDNEY, November 13, 2011 - The Australian left-hander, ranked 215, beat compatriot John Senden by a shot with the former world number one Woods another stroke away in third.
Chalmers had a controlled final round of three-under par 69 to finish 13-under on 275 for the tournament.
Overnight leader Senden fought back from four bogeys in his opening seven holes to leapfrog Woods to second spot with a par 72 for a 12-under 276.
Woods, a 14-time major champion, had a closing five-under 67 for 11-under 277 and still has not won a tournament since the 2009 Australian Masters.
It was Chalmers's second success in his national Open after winning at Royal Adelaide in 1998 and it was only his third win on the Australian PGA Tour along with two wins on the secondary US Nationwide Tour.
Chalmers finished a two-shot runnerup when Woods won his last tournament at the Australian Masters two years ago at Melbourne's Kingston Heath.
Chalmers hit the front at the day's third hole and steely held it together to take a prestige victory over a field stacked with US PGA Tour stars, here for next week's Presidents Cup at Royal Melbourne.
Leading final round scores from the $1.54 million Australian Open at The Lakes Golf Club (par 72) on Sunday (Australian unless stated):
275 - Greg Chalmers 67-72-67-69
276 - John Senden 70-71-63-72
277 - Tiger Woods (USA) 68-67-75-67
279 - Geoff Ogilvy 70-74-70-65, Adam Scott 69-71-71-68, Nick Watney (USA) 66-73-68-72, Nick O'Hern 69-72-66-72, Jason Day 69-68-68-74
280 - Aaron Baddeley 73-71-67-69, Ryan Haller 70-73-65-72
281 - Kyle Stanley (USA) 72-72-67-70
282 - Scott Arnold 71-71-72-68, Matthew Jones 69-70-74-69, Bubba Watson (USA) 68-70-72-72
283 - Matthew Millar 68-73-73-69, Terry Pilkadaris 71-74-69-69, Fred Couples (USA) 67-74-71-71, Jarrod Lyle 65-74-69-75
Selected scores:
285 - Kelly Kraft (USA) 71-74-68-72
286 - John Cook (USA) 69-74-71-72
287 - Bill Haas (USA) 72-71-72-72, Choi Joon-Woo (KOR) 73-67-74-73
289 - Dustin Johnson (USA) 66-75-75-73, David Toms (USA) 72-73-70-74
293 - Greg Norman 71-74-73-75