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The top seed was not at her best but, having been pushed all the way by Sherrock, held her nerve to secure a 6-5 win at Blackpool's Winter Gardens.
It is a third Matchplay title in four years for Greaves but having let a 5-3 lead slip, the 22-year-old was under pressure when Sherrock hit a 180 in the decider.
But the 22-year-old hit back with a maximum of her own and followed it up with a 145 set-up before taking out 56 to seal the win.
"I'm not one to celebrate but I just felt the relief after winning," Greaves told Sky Sports.
"To hit that last dart was just an outpouring of relief. I am just so happy to win.
"I was nervous. That kind of pressure is a privilege - I am doing well and playing well. I didn't think I played my A-game, but just to win and get over it is such a massive thing. It is a terrific night."
Doncaster's Greaves came in as the clear favourite but having breezed through her quarter-final, found herself in trouble in the semis.
Gemma Hayter took her to another deciding leg but Greaves came through in style against the darts, producing a 104 checkout to reach the final.
However, for the third year running she came up just short in the final as a first Women's Matchplay title since the inaugural tournament in 2022 continues to elude her.
For three-time women's world champion Greaves, though, it is another major triumph in what has already been a year to remember.
In April, she became the first woman to win a PDC ranking title when she beat Michael Smith.
She is also the first woman to hit a nine-dart finish on the PDC ProTour , having done so in a win against Mensur Suljovic in February.
"I knew before that playing women is just a little bit different for me now - I just try and concentrate on the men's game - but when I come back and play at this tournament it is hard and I knew it would be tough," Greaves added.
"I didn't think I'd ease through it but after last year's disappointment, I am so chuffed to get the win. The relief is so good for my game going forward."
GreavesWomen's MatchplayBeau GreavesWomen's World MatchplayFallon Sherrock
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