Shabana, who celebrated his 31st month in a row as world number one this month and was looking to become only the fourth player in history to win a fourth world title, rued his missed chances when leading 5-3 and 8-6 in the fourth game.
"I had my chances and missed them - I should have won in the fourth," said the 29-year-old from Giza afterwards. "I played all right - he had to play well to beat me."
Fourth seed Ashour, who earlier in the tournament had admitted being nervous about being back in England for the first time since an injury-beset British Open in May, was delighted with his performance. 
"I think that was my best ever match - I gave it all. I've never been so focussed."
In his first appearance in a World Open final, Ashour will face fellow countryman Karim Darwish, after the 27-year-old from Cairo beat Australia's former champion David Palmer 11-6, 11-9, 11-8 in 46 minutes.
"I'm so happy to be in the final of the World Open - the biggest event of the year," said the seventh seed. "And I am so pleased to be in the final against my team-mate Ramy.
"Off court, we are really good friends, but on-court we don't think about it!"
[4] Ramy Ashour (EGY) bt [1] Amr Shabana (EGY) 11-6, 7-11, 7-11, 11-9, 11-7
[7] Karim Darwish (EGY) bt [5] David Palmer (AUS) 11-6, 11-9, 11-8
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Issued by iSPORTmedia

The capacity crowd in Manchester - which included two IOC delegates attending the event in the observation process for Squash's bid to become an Olympic sport in 2016 - witnessed a titanic all-Egyptian encounter in which 21-year-old Ramy Ashour beat defending champion Amr Shabana, the World No1 11-6 7-11 7-11 11-9 11-7.