The four-times champion German's lap of one minute 23.380 seconds eclipsed his pole record of 1:23.529 set at the lakeside circuit in 2011 and was nearly half a second faster than both the Mercedes cars.
Mercedes' new driver Valtteri Bottas, who replaced retired champion Nico Rosberg, was second fastest, just edging three-times champion team mate Lewis Hamilton.
Ferrari's Kimi Raikkonen was fourth, with Nico Hulkenberg fifth in his Renault.
Red Bull's Daniel Ricciardo was sixth fastest, with his team mate Max Verstappen 12th.
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Williams' rookie driver Lance Stroll skidded into a barrier and blew a tyre, causing the red flag to be raised with 10 minutes left in the session.
The session was then called off, leaving constructors' champions Mercedes unable to improve upon their times and adding spice to the qualifying session later on Saturday (0600 GMT).
Hamilton was fastest in both practice sessions on Friday.
(Editing by Sudipto Ganguly)
