The second-ranked Azarenka defeated Williams 7-5, 6-3 in front of about 3,000 fans at the Hua Hin World Tennis Invitation in a match both players used as a warm-up ahead of the Australian Open.
Azarenka broke for a 6-5 lead in the first set and broke twice in the second for her second victory at the exhibition event after 2011.
Williams beat Azarenka in the U.S. Open final this year.
The American said the match was "a good warm-up before Australia. Victoria is a strong player. It's always fun to play someone like her."