Li won with a score of 770.3, but was forced to mount a comeback to claim the crown.
The Chinese had qualified in third place for the final and was seven points behind Sergey Malyshev of Russia.
But he left his best shooting until late in the competition, overhauling the deficit and then posting a massive 51.7 points to clinch the title.
The gold is his fourth Paralympic Games medal following victory in the 10m Air Pistol - SH1 at Athens 2004 and silver in both the Mixed 25m Pistol - SH1 at Beijing 2008 and the 10m Air Pistol - SH1 at Sydney 2000.
Afterwards, Li said: 'I didn't feel I performed very well in qualifying this morning, when I finished in sixth. It was a bad performance.
'I knew I had to do better this afternoon and I'm glad that I did.'
Malyshev took silver with a total score of 765.5 points, ahead of compatriot Valery Ponomarenko (764.9).
The two-time Paralympic Games champion Andrey Lebedinskiy finished a disappointing 17th to end his run of collecting medals in the event at the previous four Games.