Set 231 to win, WA crumbled for 156 on a tricky pitch at the WACA ground in Perth as unheralded Blues quick Liam Hatcher (4-49) inflicted serious damage on the lower order.
Batting with injured No.11 Joel Paris, former Australia allrounder Ashton Agar went down swinging.
Paris and Agar put on an innings-high 53-run stand for the last wicket to give NSW some nervous moments before closing out the game.
But Agar was bowled for 46 the first ball after drinks in the second session of day four, slashing onto his stumps off Ryan Hadley (3-30).
NSW lost serious bowling experience in the off-season with Jackson Bird moving back to Tasmania and Moises Henriques retiring.
The upset result is a huge boost for veteran Test spinner Nathan Lyon, who has taken on the Blues' captaincy duties in place of Henriques.
WA veteran Cameron Bancroft did nothing to impress selectors for a potential Test recall, out for 3 after making 10 in the first innings.
Test allrounder Cameron Green fell for 24 on Tuesday, following up after making 19.
Green, who is being eased back into bowling following serious back surgery last year, sent down just four overs in the match.
NSW's contenders for a potential Test spot - Sam Konstas and Kurtis Patterson - also failed to capitalise.
Incumbent Test opener Konstas made 4 and 14, while Patterson, who played the last of his two games for Australia back in 2019, was dismissed for 8 and 4.
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