Higgins recovered from 8-3 and 9-4 down to produce one of the finest comebacks of his career, reeling off six consecutive frames across Sunday evening and Monday afternoon to seize control of a match that had appeared to be slipping away.
O'Sullivan, chasing a record eighth modern-era title, briefly regained an edge with breaks in the closing stages, including an 81 to force the decider, but could not deliver the decisive blow.
In the final frame, Higgins capitalised after an early chance went begging, composing a match-winning contribution to clinch a memorable victory to a standing ovation.
“I came to the party at last,” Higgins said. “At 6-2 down, I felt if I could win a couple of frames, I had a chance.”
O’Sullivan admitted he had missed key opportunities, saying that while he felt in a better place than in recent years, he had not been the stronger player over the contest.
Higgins advances to the quarter-finals, where he'll face Chris Wakelin or Neil Robertson.