Austrian Thiem, who has failed to win a match at any of the tournaments he has played since his wrist injury comeback in March, made 42 unforced errors as his once dominant claycourt game deserted him.
The 28-year-old Austrian has not played since suffering the injury at the Mallorca Open in June.
The 27-year-old said that a right wrist injury will keep him out of action for several weeks.
Fittingly the London era ended as it began with a Russian winner after Nikolay Davydenko took the 2009 title.
Rafael Nadal's dream of a first ATP Finals title and Novak Djokovic's quest for a record-equalling sixth vanished in defeats by Daniil Medvedev and Dominic Thiem in two seismic semifinals.
The 27-year-old Austrian appeared to be sliding to defeat when he trailed 0-4 in the third-set tie-break but stormed back to claim a 7-5, 6-7(10), 7-6(5) victory in just under three hours.
World No. 1 Novak Djokovic beat Alexander Zverev 6-3, 7-6(4) to seal a last-four spot.
The Spaniard beat defending champion Stefanos Tsitsipas 6-4, 4-6, 6-2 in the last round-robin match in the London Group.
The world No. 3 struck 37 clean winners to claim his second round-robin victory and reigning champion Stefanos Tsitsipas's narrow defeat of Andrey Rublev later guaranteed the Austrian a semifinal spot with a match to spare.
Austrian Dominic Thiem got his campaign off to a fine start with a 7-6(5), 4-6, 6-3 victory over Stefanos Tsitsipas.