The elegant Bulgarian had the edge for most of an enthralling contest of one-handed backhands in front of a sizeable crowd at London's O2 Arena but admitted he felt "pretty nervous" in his first appearance at the end-of-season showpiece.
The sixth seed, who has enjoyed the best season of his career, looked wobbly as he blew his chance to serve for the match at 5-4 in the decider only to hit back immediately as Thiem himself faltered, sealing victory on his third match point.
"I'm not going to lie -- I was pretty nervous, my first match out here," said Dimitrov.
"I'm just very grateful to win that match, especially in that manner. It's never easy to come out here and play for the first time."
A single break was enough for Dimitrov to take the first set, with his fourth-seeded opponent only managing to land 37 percent of first serves on the zippy blue court.
In a tight second set, the 26-year-old earned a potentially decisive break point in the 11th game but Thiem, whose service numbers improved significantly, held firm and went on to break to love in the next game to level the match.
In a topsy-turvy decider, Dimitrov engineered a break and served for the match only for Thiem to hit back, but that only brought a stay of execution for the Austrian, who served two double faults to hand the advantage back to his opponent.
Later, Nadal takes on David Goffin in the second match in the Pete Sampras group, with questions over his fitness after the Spaniard admitted he was not training at 100 percent following his withdrawal from the Paris Masters with a knee injury.
The world number one has won 75 singles titles in his illustrious career, including 16 Grand Slams and 30 Masters events but he has yet to win the ATP Finals in seven previous appearances.
In the absence of Novak Djokovic and Andy Murray, all eyes are on a potential showdown in London between Nadal and Roger Federer, who started his bid for a seventh ATP Finals title with a straight-sets victory against American Jack Sock on Sunday.
In the other match in the Boris Becker group, rising star Alexander Zverev beat Marin Cilic in three sets.
The ATP Finals feature the top eight fit male singles players and doubles teams that have accrued the most points throughout the 2017 season.
The tournament is organised on a round-robin basis, with the best two from each group progressing to the semi-finals.