Annette Edmondson, Ashlee Ankudinoff, Amy Cure and Melissa Hoskins took almost three seconds off the world record to upset four-time reigning champions Great Britain in the final.
The quartet posted a new best-ever time of 4min 13.683sec.
Australia lowered its national record for the second day running when
they progressed to the gold-medal race in France's new
national velodrome in 4min 17.410sec.
Coach Gary Sutton told AAP after the race he'd had the women on a world record schedule because he thought that's what was needed to beat the British team.
"It wasn't about the world record, it was about winning," he said.
"The schedule was 4:16 and they were well under that but they were always comfortable."
Nevertheless, Sutton was surprised too see the timing board flash 4:13.683.
"They went a lot better than I thought - but we've seen it coming."
The Australians could start to see the British squad up ahead on the track towards the end which gave them added incentive.
Hoskins said it was "phenomenal" to take seven seconds off the national record in three weeks.
"But we went into the ride just wanting the rainbows," she told AAP.
"It's been five years in the making and we wanted it bad.
"To get a world record, a national title, as well as the rainbows - it's a great day out for us."
The 23-year-old said every team lifts for a final "but we just happened to lift more than them (the British)".
"They've had a cracker run but finally we got one up on them."
Edmondson said it felt like the quartet was flying on Thursday night.
However she was too busy celebrating after crossing the line to realise the Australians had smashed the world record.
"It took me about two laps before I looked up and saw the time," Edmondson told AAP.
"It's absolutely incredible. I can't believe it."