Muguruza, who will be playing in her first semifinals of this tournament since 2015, needed the win to advance at the expense of Wimbledon finalist Karolina Pliskova. Kontaveit was already assured of a spot in the semis before her last group stage match.
Muguruza avenged a recent loss to Kontaveit, who beat her in just 48 minutes in the Kremlin Cup quarterfinals in Moscow last month.
"I have been improving and found myself, today I knew that it was a must-win match and went out to get it," Muguruza said. "I had to end Anett's streak, she was like invincible in the tour and fortunately I did it."
Muguruza had an early break and then saved two break points to take the first set against Kontaveit, who never appeared settled in the night match.
"She was not at the top of her game tonight, I could see it, maybe [being] already qualified to the semifinals had something to do with it," added Muguruza.
The WTA Finals are played in a round-robin format with the top two players from each group advancing.
The semifinals will be played on Tuesday and the final is set for Wednesday at the Centro Panamericano de Tenis in Zapopan.
Pliskova rallied from a set and a break down to beat Barbora Krejcikova 0-6, 6-4, 6-4 in the earlier match to maintain a chance of reaching the semis, but was eliminated with the Muguruza win.
"Obviously horrible start, horrible first set. I think was [the] combination of both me not playing really well and [her] playing just amazing,'' Pliskova said. "I'm just proud that I was able to reset and start from zero and find a bit [of] my game, although it was not great."
French Open champion Krejcikova finished the singles tournament 0-3, but remains alive in the doubles along with Katerina Siniakova.
"I think I had amazing season. I was doing really well throughout the season and right now it's very disappointing,'' Krejcikova said. "I really want to do well in doubles with my partner. I'll just keep going, stay focused."
The WTA Finals are being played in Guadalajara for this year only, with the event scheduled to return in 2022 to Shenzhen, China.