Ilonen fought back from being 1 down after four holes against the fifth-ranked Swede on the London Club course at Ash in Kent. It was the 34-year-old Finn's fifth European Tour victory and his second this season after winning the Irish Open.
"While I didn't play so well this morning, I didn't make any mistakes this afternoon against Henrik," said Ilonen. "(I) felt like I had a good chance to beat him and I did."
Three years ago Ilonen's career was in chaos, having sustained an ankle injury that required surgery and kept him out of the second half of the 2011 season.
However, after falling to 334th in the world rankings early in 2012, Ilonen has continued to improve. He finished 23rd on the money list last year.
Stenson seized the early initiative, winning the fourth with a birdie. But Ilonen took the next hole with a par and went 1 up with a birdie at the eighth. He increased his lead to 3 up by the 12th.
Stenson won the 13th with a birdie but Ilonen hit back immediately to stay 3 up at the 14th.
However, Stenson then birdied the par-five 15th to get back to 2 down before both players parred the 16th and Ilonen won with a birdie at the 17th.
"I was quite low on energy this afternoon and I also feel like I have been battling my swing in these windy conditions," Stenson said.
Victory earned Ilonen his highest tour prize of 650,000 euros ($830,000)
In the third-place playoff, Luiten defeated Coetzee at the first extra hole.