The British athlete was one of the favourites for the title going into the event, but he was slow out of the blocks and lay back in eighth position after ten metres.
However, Heath's phenomenal power saw him overhaul France's Maxime Beaumont to win in a time of 35.19 seconds.
Hungary's Kozak paddles her way to a triple gold
Heath had already claimed silver in the double sprint kayak, and his partner in that event was choked up after watching his friend's phenomenal comeback.
Britain's Liam Heath celebrates after the Men's Kayak Single (K1) 200m final at the Lagoa Stadium
Image credit: AFP
"It so emotional to see one of your best friends do that," Jon Schofield said. "I have seen all the work that he has put in and how much he deserves it.
He can truly inspire a generation back home, there is no point in doing any of this if it is not having a positive impact on peoples' lives.
"Hearts were in our mouths in the stadium there, but Liam being Liam just flew by them! I would like it if he got a better start, but if you are as fast as Liam you can afford to be a little bit calmer in the early metres."
Britain's 25th gold medallist of the Rio Games is now the most successful sprint kayaker in British history and the muscle-bound Heath revealed that it has taken years of hard work and motivation to get him to this point, before thanking all those who helped him reach the summit of the sport.
"It has been in my mind every single day for the last four years, but I felt that I went into automatic pilot," Heath said. "It is unbelievable. You don't realise who is where alongside you. You are just focused on your lane
"It is worth every ounce. I want to thank everyone here and at home. Jon has been out everyday doing drills with me and checking my boat over even though he finished."
Heath's gold takes Britain's medal tally up to an incredible 61, including 25 golds.
Brazil's Queiroz dos Santos secures third Olympic medal, misses out on gold
GB's Heath and Schofield secure dramatic silver in 200m kayak final