Meseret Defar shocked Tirunesh Dibaba with a stunning last lap to reclaim the Olympic 5,000m title she last won in Athens in 2004.
Dibaba had looked on course to record a historic London double, having
won the 10,000m last week.
But, after Dibaba had taken the lead with four laps to go, fellow Ethiopian Defar surged ahead on the final lap to win in 15 minutes 4.25 seconds.
Kenya's Vivian Cheruiyot won silver while Dibaba came in third for bronze.
"Goodness me that was a shock result. Meseret Defar could hardly believe it. She has been second best recently but has somehow shown the form she showed in Athens. That is one of the big shocks of the Games."
Great Britain's Jo Pavey finished seventh while Julia Bleasdale was one place behind in eighth.
Pavey and Bleasdale had the home crowd cheering with just five laps to go, with the British pair setting the pace.
However, they started to drop down the field as Dibaba made her move to the front.
As the bell rang for the final lap, Dibaba was still in front and looked firmly on course to replicate her 5,000/10,000m double in Beijing.
But her expected surge never came and she was outpaced on the final stretch first by Dibaba and then Cheruiyot.
For Bleasdale, this was her first Olympic Games and she feels confident she has proven herself capable of competing on this stage.
"I came to this Olympic Games saying I am not here for the tracksuit and I think I have shown I am capable of competing with the best in the world," said Bleasdale.
"The next stage is to show I can be one of the best in the world."