Australia, who were favourites after coming within a whisker of breaking the world record in qualifying on Wednesday, fell behind midway through the race but recovered impressively to surge to victory with a 2.476 second gap over their rivals.
The win for Sam Welsford, Alexander Porter, Cameron Meyer and Nicholas Yallouris is Australia's seventh world title in the past 11 editions of the event, while Italy took bronze over a new-look Britain side.
Poland's Adrian Teklinski won the men's scratch race for his first world title after risking everything with a surprise attack in the final kilometre that saw him open up a half-lap lead over the pack.
Germany's Lucas Liss, the 2015 champion, chased hard as Teklinski tired but could only manage silver, while Britain's Chris Latham held on in third for his first championship podium finish.
Azizulhasni Awang won Malaysia's first world title with a comprehensive victory in the men's keirin, finishing three lengths clear of silver medallist Fabian Hernando Puerta Zapata of Columbia, with Czech cyclist Thomas Babek in third.
Awang, known affectionately as "Pocket Rocket Man", won bronze in each of the last two editions of the world championships.
The day ended on a high note, with the U.S. women's pursuit team defending their title in a thriller against Australia that had the crowd on its feet.
The U.S. team of Kelly Catlin, Chloe Dygert, Jennifer Valente and the veteran Sarah Hammer charged into an early lead, but Australia recovered by the 2,500 metre mark and the teams raced to the finish with neither able to stay in front.
Australia were ahead by 0.412 seconds going into the final lap, but an inspired effort from Dygert pulled the Americans over the line with a 0.417 second margin of victory, while New Zealand took bronze over Italy.
(Writing by Hardik Vyas in Bengaluru; Editing by Alison Williams)
