Former Brooklyn Nets starter Rondae Hollis-Jefferson scored a game-high 24 points but it was not enough to deliver Jordan a first basketball gold in their history.
Both sides started slowly in an error-riddled first quarter in Hangzhou edged 17-12 by the Philippines, but Jordan rallied to enter half-time level at 31-31.
The momentum shifted back to the Philippines in the third quarter and they took a 51-41 lead into the home stretch and then held their nerve for a famous victory.
"It feels great, man," said Ivory Coast-born Angelo Kouame, who added 14 points.
"We knew the team needed that win and to get the job done. Everyone came together and that was a great team effort.
"It means a lot after all these years, and that's bigger than all of us," he added.
The Philippines won Asiad gold four times in a row from 1951 to 1962 but had made just one final since, in 1990, when they went down to China.
China then took over on the regional stage, winning eight of the last 11 gold, with South Korea claiming the other three.
But there has been a changing of the guard in Hangzhou with South Korea failing to make the knockouts and China relegated to third, winning the bronze-medal match against Taiwan 101-73 ahead of the final.
"It means a lot for not just me but everybody in that locker room," said American-born Chris Newsome, who sank 13 points for the Philippines.
"There was a lot of people who didn't think we could do it, and we proved them wrong."
Newsome was assigned to mark the danger man Hollis-Jefferson and admitted it was a tough task.
"He's a hell of a competitor so I went out there to try to give my best and to try to stop him," he said.
Both sides suffered nerves in the first quarter, with Jordan sinking just three-from-17 field goals and the Philippines faring little better with six-from-18.
But a three-pointer from Brownlee just before the buzzer gave the Philippines the edge heading into the second quarter and they stretched to a 13-point lead.
Huge back-to-back baskets outside the arc from Fadi Mustafa and Hollis-Jefferson helped haul Jordan back into the game and they went to half-time level.
Jordan took the lead for the first time when Hollis-Jefferson sank a two-pointer soon after the restart, but the Philippines kept coming and seized back control, led by Brownlee and Newsome.
Taking a 10-point buffer into the final quarter, they survived some nervy moments and clung on.
China, stunned by the Philippines on the buzzer by a point in the semi-finals, defeated Taiwan in the third-place playoff.
Taiwan took a 49-46 advantage into half-time, but China came out swinging to dominate the third quarter 34-10 and set them on course for victory.
Young power forward Cui Yongxi led the way for the hosts with 20 points and five rebounds.
