The 26-year-old, finally beginning to consistently deliver on his huge potential, edged the so-called "battle of the backhands" after a compelling two hours 21 minutes.

Dimitrov, the first Bulgarian to qualify for the tournament in its 48-year-old history, overcame some late jitters to prevail in the opening Pete Sampras Group match.

The world number six served for the match at 5-4 in the decider but was broken to love before two consecutive double faults by Thiem gave him another chance to close it out.

Again Dimitrov wobbled, squandering two match points at 40-15 with a double-fault and a tight forehand error, but he finally bagged the win when Thiem looped a backhand long.

"The first time I got broken (at 5-4) I thought 'okay let's get back up and try again'," Dimitrov, who enjoyed some noisy support from a contingent of Bulgarian fans, said on court.

"I'm living my dream right now and I wanna keep on going."

World number one Rafael Nadal opens his quest for a first ATP Finals title later against Belgium's David Goffin.

Nadal's appearance has been in doubt after a knee injury forced the 31-year-old Spaniard to withdraw midway through the Paris Masters tournament.

Dimitrov was the better player in the first set as Thiem struggled for rhythm on serve. He broke in the sixth game and was rock-solid, winning 16 of 18 first-serve points.

World number four Thiem, playing for the second successive year, raised his game in the second set and broke to love in the 12th game to level the match.

Australian Open semi-finalist Dimitrov produced a magical drop-volley from impossibly close to the net to break Thiem's serve at 3-3 in the decider and held his own to lead 5-3.

Finishing the job proved to be the hardest part though and it was a relieved Dimitrov who finally prevailed.