Ducati's Bagnaia looked on course to take pole with a scorching lap but was bumped out from the top spot by 35-year-old Espargaro's late effort in the second qualifying.
Espargaro, who announced in May that he will retire at the end of the 2024 season, went fastest with a time of 1:57.309.
"This lap was amazing," Espargaro said. "I risked a lot. It was not my plan to risk like that.
"I did a really good lap with the first soft tyre... and then I said to myself, you have to try, you have to go full or nothing... The lap was just perfect... an unbelievable lap with these conditions."
Enea Bastianini of Ducati finished third fastest, while Prima Pramac Racing's world championship contender Jorge Martin, who will switch to Aprilia from the 2025 season, came fourth despite showing promising pace in the practice sessions.
Martin trails Bagnaia by 10 points in the championship and will have the opportunity to close that gap during the sprint later on Saturday.
Six-times MotoGP champion Marc Marquez of Gresini Racing, third in the championship, came in seventh.
Alex Marquez, Brad Binder, Maverick Vinales, Pedro Acosta, Fabio Di Giannantonio, Jack Miller and Marco Bezzecchi rounded up the top 12.
