World champion Van Niekerk scorched around the Rio track to finish five metres clear of the pair in 43.03 seconds, bettering Michael Johnson's long-standing mark by 0.15 of a second.
"It was incredible. To be honest, I'm just happy to be part of history," said silver medallist James, the 2012 London champion.
"He just wouldn't slow down. Usually guys slow down a bit in the last hundred but he just kept going. When you keep going like that obviously a world record is going to fall."
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James said he thought the winning time would be around the 43.5 mark, and bronze medallist Merritt was equally surprised by how fast Van Niekerk went.
"I knew the time was going to be fast but I didn't think it was going to be 43.0 fast," said the 2008 champion. "But it is what it is. He ran his heart out.
"You gotta run from the start to run 43.0. This is a great era and I'm proud to be part of it."
James's compatriot Bralon Taplin, who finished seventh a second and a half behind Van Niekerk said the record run would offer hope to all athletes.
"For him to break that record has opened the barriers for every athlete out there," he said.
(Editing by Sudipto Ganguly)
