O'Shea had two darts at double tops which would have given him a two-set lead at 4-2 and a stranglehold on the match.
However, he could not convert and Waites was ruthless, levelling the match at three sets a piece.
The two-time world champion briefly found his rhythm but he has not played as regularly as many others on tour this year and lost his way again in the ninth set, missing a shot at bull that would have taken him to within one set of victory.
'He said it was his destiny!'- Emotional Duff lifts world title
10/04/2022 AT 21:33
Instead it was O'Shea closing in on the title and more profligacy from Waites, missing double eight, allowed the Irishman to take the first leg against the darts.
He had 100 for the title, but the inevitable nerves hit him and a dart that should have been in the treble bed ended up in the one.
It was even less in the next leg when he went an unusual route to 95 and missed his match dart, only for Waites to miss double eight and double four.
O'Shea would not miss again, raising his arms aloft as the 44-year-old sealed comfortably the biggest win of his career.
"Three or four weeks ago I probably thought I was going to pack it in because I couldn't throw because my leg was in trouble," O'Shea said afterwards.
"I got it sorted still coming into this but it still wasn't 100 per cent.
"I'm emotionally drained."
Earlier in the women's draw, BDO world No 1 Lisa Ashton successfully defended her 2018 title to become a three-time World Masters champion.
She had barely been tested on her way to the final, sweeping aside Mayoumi Ouchi and Kasumi Sato for the loss of just two legs in total.
But Russia's Anastasia Dobromyslova contributed to a high-quality final which went down to the wire, Ashton winning the decider to pick up her 12th BDO major.
Maria O’Brien takes a tumble during her walk on at the World Darts Federation at Frimley Green
08/04/2022 AT 15:51
Three-time world champion Adams stunned by Cole in opening match
02/04/2022 AT 13:26