Ye, 16, set a new world best of four minutes 28.43 seconds, ahead of American world champion Elizabeth Beisel and fellow Chinese Li Xuanxu.
The 16-year-old overwhelmed American world champion Elizabeth Beisel to win the final in four minutes 28.43 seconds to cap a glittering night for China in the pool following Sun Yang's breakthrough victory in the men's 400m freestyle.
Ye put in a storming final freestyle leg to shatter the previous record of 4:29.45, set by Australian Stephanie Rice en route to gold at the Beijing Games four years ago.
So supercharged was Ye's finish that she stormed under the world record on the back of a 28.93sec final lap to leave her rivals in her wake.
"I thought at the 200 metres that the race was lost," Ye said. "But then on the breaststroke I realised I was in the top two or three and I was confident I could win on the last leg.
"I've been working on my butterfly and backstroke since last year's world championships and have closed the gap, while freestyle is my best stroke. I dreamed of winning the gold medal, but I never ever expected to break a world record, I'm overwhelmed."