Despite the loss, Osaka, who crashed out of Wimbledon in the first round last month, will return to the world No.
Williams, meanwhile, who was recently ousted by Simona Halep in the Wimbledon final, looked in fine form against her Japanese opponent as she surpassed Arantxa Sanchez Vicario's record of 32 Rogers Cup wins.
Visit CNN.com/sport for more news, videos and featuresThe pair seemed evenly poised in the opening set until Williams broke in the seventh game.
READ: Nick Kyrgios enjoys one of the 'favorite weeks' of his lifeAfter the match, Osaka spoke of her admiration for Williams, whom she has beaten on their two previous meetings.
READ: WTA Finals offer historic $4.75 million prizeThe 21-year-old has previously dubbed Williams her "tennis mom."