The 30-year-old Kenyan knocked 26 seconds off the record of 2:03:23 set by compatriot Wilson Kipsang in Berlin last year to become the first man to complete a marathon in under two hours, three minutes.
Another Kenyan, Emmanuel Mutai, was also faster than the previous best, finishing second in 2:03:13.
Mutai had run the fastest marathon in history in 2:03:02 in Boston in 2011, though it didn't count as a world record because the course is considered too straight and downhill.
Abera Kuma of Ethiopia was third in 2:05:56.
Tirfi Tsegaye won the women's race in 2:20:18, with fellow Ethiopian Feyse Tadese second with 2.20.27.
American Shalane Flanagan was third in 2:21:14, missing out on her bid to beat the U.S. record of 2:19:36.
Some 40,004 runners from 130 nations were accepted for the race, which was run in perfect clear conditions.
Kimetto, whose previous personal best was the 2:03:45 he ran to win the Chicago Marathon last year, was part of a leading group including Mutai, Kuma, Tsegaye Kebede, Eliud Kiptanui, Geoffrey Kamworor, Levy Matebo and Franklin Chepkwony.
They maintained a steady pace but lost a couple of seconds after the 12th kilometre, before picking it up again after 15K. Matebo and Kiptanui dropped back as the leaders crossed the halfway mark in 61 minutes 45 seconds - inside world record pace.
Pacemakers Wilfred Kirwa and Geoffrey Ronoh dropped out at 30K, which Mutai reached in a blistering 1:27:37, a world record if confirmed.
He was only accompanied by Kimetto and Kamworor, who dropped 10 seconds behind his compatriots by the 35th kilometre.
Kimetto was running more smoothly, but Mutai kept challenging, reminding the Chicago marathon champion that he was still there.
Kimetto put a couple of seconds on his training partner with an injection of pace in the 39th kilometre, and he used it as the springboard for the seventh world record to be set in Berlin.