In the men's bracket, top-seeded David Ferrer of Spain downed seventh-seeded Ivo Karlovic of Croatia 7-6 (3), 6-3 and will face third-seeded Richard Gasquet of France in Sunday's final. Gasquet defeated second-seeded Tomas Berdych of the Czech Republic 7-6(3), 6-3.
Williams had three match points in the tiebreak of the second set but couldn't finish off the fifth-seeded Razzano, who won her second straight WTA tournament.
"I'm very happy to win," said Razzano, who won the Guangzhou International Open on Sunday for her first WTA Tour singles title. "Venus is a great champion, she's not in the top 10 by magic."
Williams, No. 8 in the WTA rankings, was down 5-2 in the second set but fought back to tie and then broke Razzano to take a 6-5 lead.
Razzano broke Williams to force a tiebreak and then came back from being down 6-3 to win the tiebreaker 9-7.
Williams won the first game of the third set but took a 10-minute injury timeout and came back with her right thigh wrapped.
"It started to hurt in the first set," said Williams. "I wanted to play because I wanted to win, then in the third set I couldn't get my leg up on my serve so I had to get it taped."