Phelps shaved nine hundredths of a second off his previous record of 1:53.80, which he set at the Pan Pacific Championships on August 17.
It was the fifth time the 21-year-old has broken the 200 metres butterfly world record, one of the six events he captured a gold medal in at the 2004 Athens Olympics.
Phelps said he hoped to go even faster when he swam the event in next month's world championships in Melbourne, Australia.
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"I didn't think I was going to break a record tonight," he told reporters.
"I could tell something good was happening when I heard the crowd yelling," added Phelps, who led by four body-lengths at the 150-metres mark, which brought the packed crowd at the Mizzou Aquatic Center to its feet.
"But when I looked up at the clock I thought it said 1:56," he added.
However, a second inspection made him realise how fast he had completed the race.
"When I took off my goggles and saw the time, you could tell that my reaction changed a little bit, and I basically went nuts," Phelps said.
"I definitely did not expect that tonight."
Phelps, who won a total of eight medals at the Athens Games and is swimming six events in the Missouri meeting, said his performance came as a result of some solid training.
"A lot of our practice has been focused on underwater kicking, and I know that the more kicking I do, the faster I can go," he said.
"Coming off the wall well when people are getting tired is a good weapon to have. We have wanted to work on it and it's starting to show now."
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