"(We are) having to play each other in the third round, one of us is going to be gone", Serena said. "Even though I haven't even played that much this year, the matches in the last year count", Venus said. "So it is what it is".
Venus's victory also comes 17 years after an ugly booing incident led to a 14-year boycott of the tournament by the sisters.
The Dane needed two hours and 17 minutes to get past the world No.49 Belarusian.
"It wasn't very easy, obviously", she said. So if she makes a mistake, I just - a little bit of me dies.
But just as Venus looked in complete control, Serena broke back to reduce the deficit to keep her hopes alive.
Stephens, who won her first major at Flushing Meadows last fall, lost in the first rounds at the Australian Open and in Sydney before reaching the quarterfinals at Acapulco.
It was their earliest meeting in a regular tour event since their first duel on tour, which came in the second round of the 1998 Australian Open.
Serena is still shaking off the rust after the long layoff as she hit four aces but had her serve broken four times. I mean, it's an incredible fascinating story, like you said.
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Venus Williams (L) and Serena after the game at Indian Wells. But still a great comeback week for Serena, who will only get better with more matches & tournaments.
Unbeknownst to the general public, Serena was two months pregnant when she won that title. "Seventeen years seems like forever ago".
Venus is enjoying a resurgence on the Tour after a string of injuries limited her playing time for several seasons.
"She gave me the trophy because I was so upset".
"I think this is the best she's played in a while". She then served to love in the ninth game to take the set.
There was booing and jeering, and some of Serena's unforced errors where cheered as she claimed the title in three sets.
Danish second seed Caroline Wozniacki beat Spaniard Lara Arruabarrena 6-4 6-1, while Ukrainian fourth seed Elina Svitolina defeated German Mona Barthel 6-4 6-3.
The sisters' father was then accused of fixing matches between his daughters and predetermining who would win on any particular day.