Watched by Prime Minister Kevin Rudd and her family, Rice's win gave Australia its 400th summer Olympic medal.

"It's an amazing achievement, it hasn't really kicked in yet. I've really given it my all," the 20-year-old said.

"I was really focused on my own race. I wasn't really thinking about the end of the race."

Rice led the pool for the first 200 meters before being caught by Zimbabwe's Kirsty Coventry.

But the young Australian pulled ahead in the breastroke leg and maintained the lead through the last freestyle lap to finish in a time of 4 minutes and 28.45 seconds.

The pin-up girl of the Australian team threw her arms into the air in a gesture of triumph after the race ended when she realised she had broken the world record.

Coventry came second closely followed by American Katie Hoff.

The first of the swimming finals kicked off before a near-capacity crowd in the 17,000 seat stadium. A large contingent of Americans, among them President George W Bush, were there to greet the world's greatest swimmer Michael Phelps.

And he didn't disappoint.

Phelps blitzed the pool to set a new world record and win his first gold medal in the super fast time of 4 minutes and 3.81 seconds.

Phelps's 400m individual medley win gave him a career gold number seven and his first 2008 Beijing medal.

The American took an early lead in the butterfly leg of the event. Team mate Ryan Lochte and Hungarian Laszlo Cseh tried, but failed, to keep up as Phelps powered away.

Phelps, chasing eight gold medals at these Games, admitted to not feeling good before the race.

"To be honest I didn't really feel that great (before the race)," Phelps explained.

"Going into the ready room I started getting chills on my body - I knew I was starting to get more and more excited. I was pretty emotional after that race - I'm pretty excited to get that first one under my belt.

"Seeing everyone so close together after the first 200m - that is not how it is after the first 200m - it's normally the 300m mark, so I think it made my breaststroke a lot stronger, then coming home on freestyle is always adrenalin."

Team mate Lochte said after the event Phelps "competed the whole way and he did really well."

"I guess you can say I went out too fast, I knew I had to get out fast," he said.

In a technical mishap, the American national anthem was interrupted in the last few bars as Phelps stood on the podium to receive his medal.

In other pool action, Korea's world champion Park Tae-hwan upset Australian medal hope Grant Hackett to take gold in the 400m freestyle event.

In a disappointing finish, Hackett lost ground in the final leg of the race hitting the wall in sixth place behind China's Lin Zhang and American Larsen Jensen.

"I guess it wasn't what I was looking for. It would have been nice to be on the medal podium," Hackett said.

The Korean was spruiked going into the Games as ready to break the 2002 world mark, but came in with a time of 3 minutes and 41.86 seconds.

Australia's women's 4x100m relay team won bronze behind the Netherlands and United States with a time of 3 minutes 35.05 seconds.

A strong performance from Brenton Rickard in the 100m breaststroke put him in contention for a medal in tomorrow's finals.

Rickard was placed third overall after a semi final swim that saw him finish behind Norwegian Alexander Oen an Japan's Kosuke Kitajima.

Both Australians, Libby Trickett and Jessicah Schipper, qualified for the women's 100m butterfly finishing first in their individual heats to set up strong positions for the finals.

Schipper said after the race making it into the finals was her aim in the event.

"Making it into the final was the only thing I was after, so I've achieved that. I went faster than last night and that's always a good sign," she said.

"I definitely prefer to swim the semi finals and finals at night but we have to deal with what we're given."