After a sluggish start, the 23-time Grand Slam champion finally gave the supportive sold-out crowd something to cheer about when she crushed back-to-back aces to cut Raducanu's lead to 4-3.
But the English reigning US Open champion fired an ace of her own to snag the first set and followed that up with a break of serve to open the second.
Raducanu rolled from there, smacking an unreturnable serve on match point to end their first career meeting.
"I think we all just need to honour Serena and her amazing career," Raducanu said in an on-court interview.
"I'm so grateful for the experience of getting to play her and for our careers to have crossed over. Everything she has achieved is so inspirational and it was a true honour to get to share the court with her."
Williams was world number one and had already won four major titles when Raducanu was born in November 2002.
Williams won her last major in 2017 while pregnant with her daughter Olympia, who was in attendance in Cincinnati.
With the loss, Williams has just one professional tournament remaining before she drops the curtain on her historic career - the US Open, which begins on August 29th.
GAUFF HURT, VENUS FALLS
American teenager Coco Gauff (18) rolled her left ankle late in the first set in her match against qualifier Marie Bouzkova (24) and she eventually retired from the match while trailing 7-5 1-0.
The newly-crowned world number one in doubles will look to recover ahead of the US Open where she will hope to compete for a first Grand Slam title.
Romanian Sorana Cirstea (32) upset Swiss Olympic champion and 12th seed Belinda Bencic (25) 6-2 6-7(3) 6-4 while 14th seed Karolina Pliskova (30) eased past Venus Williams (42) 7-5 6-1.
Venus, bidding for her first win over a top-20 ranked opponent since overcoming Kiki Bertens (30) in Cincinnati three years ago, excited a half-filled Centre Court when she broke Pliskova to go up 3-2.
However, the Czech got back on level terms at 4-4 and broke again to clinch the opening set.
Williams ran out of steam and ideas in a lopsided second set as Pliskova broke the seven-time Grand Slam winner at the first opportunity on the way to a 3-0 lead.
Williams held serve at 3-1 but Pliskova, the 2016 Cincinnati champion, swept the next three games to cap a rout.
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