"I would have like to have finished a little better but we have been doing things in workout that I haven't done a long time in butterfly," he said in a poolside interview.
"Having that confidence back helped me."
Seto clocked 1:54.56 last month.
The American is coming off a high-altitude training stint and said he did not know whether he would even try to qualify for the event for next year's Rio Olympics.
"We haven't really seen much progression in this event over the last couple of years," said Phelps, a two-time Olympic champion in the event.
"I came into tonight wanting to do 1:57 and I did it. I'm not sure what's going to happen over the next year, but I'm just happy to do that (1:57) because I think it's going to help me a lot in the 100."
The 29-year-old, who retired after the 2012 Olympics but launched a comeback last year, will not contest August's world championships in Russia, due to a drink driving conviction last year.
(Reporting by Andrew Both in Cary, North Carolina; Editing by Greg Stutchbury)
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