Phelps shattered the record for most Olympic medals ever with a frustrating defeat in the 200-meter butterfly that left him with silver and then a relay gold.
It was a gripping night in the pool as Chinese teen sensation Ye Shiwen added to an earlier gold and set an Olympic record to win the 200-meter individual medley. Her victory came hours after Olympic organizers and swimming's governing body leapt to her defence, saying suspicions that she doped were "crazy" and motivated by jealousy.
Phelps lost the 200-meter butterfly to South African Chad le Clos, when, after leading all the way, he tried to glide to the wall after his final stroke, opening the way for le Clos to touch the wall first instead. Japan's Takeshi Matsuda took the bronze.
It was an astounding mistake considering he won a memorable race in Beijing when a rival made the very same error. He held his head in his hands as he stood in the pool and appeared upset with himself. But in his second race of the night, he helped the United States win the relay, earning himself the first gold of these Olympics.
With 19 career medals spanning three Olympics, Phelps broke the record of Soviet gymnast Larisa Latynina, who won 18 medals in 1956, 1960 and 1964.
"You are now a complete legend," the public address announcer bellowed, accompanied by the Foo Fighters' song "Best of You."
In the first final of the night, American Allison Schmitt won the 200 freestyle. France's Camille Muffat took silver and Bronte Barrett of Australia took the bronze.
The Americans added to their medals earlier Tuesday with a comfortable victory in the Olympic women's team gymnastics competition, grabbing their first gold since 1996. The Russians cried on the sidelines as the U.S. gymnastics team scored a comfortable victory.
The British were not as successful, and even the royal rider could not keep Germany from winning its second consecutive Olympic gold medal in equestrian team eventing.
Princes William and Harry, and William's wife Kate were among those cheering Queen Elizabeth II's granddaughter, Zara Phillips, as she competed in the show jumping course that is the third and final part of equestrian eventing.
Phillips knocked down a rail, as did teammate Nicola Wilson, ending hopes of gold. Britain won the silver and New Zealand the bronze.
"Unfortunately we couldn't quite do it," the first-time Olympian said. "We can't be disappointed with a silver medal because it's an amazing thing to be here."
Germany also took the gold and bronze in individual equestrian eventing, while Sweden won silver.
China earned its third straight Olympic gold diving medal as Chen Ruolin and Wang Hao dominated women's synchronized 10-meter, ahead of Mexico and Canada.
In tennis, Serena Williams was not selected to play in mixed doubles, while her sister Venus moved into the third round after beating Aleksandra Wozniak of Canada 6-1, 6-3.
Williams must play every day to reach the final Saturday, and the question is whether she can keep it up as she fights an autoimmune disease that causes fatigue. She is also playing doubles with her sister, Serena.
Serena Williams had also wanted to play mixed doubles. But U.S. coach Mary Joe Fernandez said Tuesday that it would have stretched her too thin.
Andy Roddick played his last day at the games after losing the second round 6-2, 6-1, to Novak Djokovic of Serbia. British hopeful Andy Murray, seeded third, advanced by beating Jarkko Nieminen of Finland 6-2, 6-4.
Olympic tennis also saw a new record when Jo-Wilfried Tsonga of France defeated Milos Raonic of Canada, 6-3, 3-6, 25-23. The previous record was 30 games, set in 2004.
There was good news for the host country as British rower Alan Campbell qualified fastest for the semifinals of the men's single sculls. Reigning two-time champion Olaf Tufte of Norway also squeezed into the semifinals by placing third in the last quarterfinal.
Britain is favoured to win three women's rowing events and has gold medal chances in several men's disciplines when finals begin Wednesday.
The French added to their medals when Tony Estanguet won gold in the men's canoe slalom, regaining the Olympic title he won in 2000 and 2004. Sideris Tasiadis of Germany took the silver and defending champion Michal Martikan of Slovakia won bronze.
The United States upset Argentina 1-0 in women's field hockey Tuesday night — this after they got into the Olympics by stunning Argentina 4-2 in last year's final at the Pan American Games — which was considered the best win in U.S. field hockey history at the time.
In Olympic men's basketball, Russia beat China 73-54 in its second victory in two games, while Montenegro dealt water polo powerhouse Hungary its second consecutive loss of the London Games, beating the three-time defending Olympic champion 11-10.
South Korea and Slovenia both won their first judo gold medals of the London Games — respectively in the men's 83-kilogram division and the women's 63-kilogram class.
And Saudi judo athlete Wojdan Ali Seraj Abdulrahim Shahrkhani learned she will be allowed to compete Friday in the women's heavyweight division, after the IOC said officials had reached an agreement.
Saudi Arabia sent its first two women athletes ever to the London Games on condition they adhere to the kingdom's conservative Islamic traditions, including wearing a headscarf. But judo officials had initially said a headscarf could be dangerous because the sport includes chokeholds and aggressive grabbing techniques.
In Olympic women's football, Britain beat Brazil 1-0 to the quarterfinals after winning Group E without a defeat, joining the United States with a perfect record of three victories from group play.
China was expected to win its seventh straight Olympic gold medal Wednesday in women's table tennis singles.