The American quartet of Phelps, Ryan Lochte, Ricky Berens and Peter Vanderkaay beat their own world record by 4.68 seconds to clock six minutes and 58.56 seconds. Russians won the silver and Australian swimmers finished third, clocking 7:03.70 and 7:04.98 respectively.

Phelps, who has just won his favorite event the 200m butterfly, led the field out and finished his four laps a body length faster than the second-fastest Australian Patrick Murphy.

The Americans led throughout the race, as Phelps puffed and waited anxiously at the deck. Before the last leg Vanderkaay closed the race about 5.14 seconds faster than the runner-up Russians, Phelps and his teammates began celebrating their win.

"It's everything I ever dreamed about. On the podium I kept thinking back at it. I'm almost at a loss for words," Phelps said after the relay.

"I'm just really pumped about the relay. We talked about breaking seven minutes, and we did it," he said.

The gold medal, the 11th in the Olympic Games for Phelps, took him one step further to be the greatest Olympian ever. It is also the second relay gold after the Americans clinched a hard-won gold in the 4X100m freestyle relay on Monday.

After the medal ceremony, Phelps hugged and kissed her mother and sisters, who were in tears over his victories on the spectators' stand.

"From now on it's just a downward slope. The end is close, I love it," he said.

The 23-year-old encountered a minor glitch in his races today, as his goggle was filled with water.

"Going into the 150m turn and the finish I couldn't see the wall. They were getting more and more full of water throughout the race. I was kind of upset it happened and then that's why I ripped those goggles off pretty quickly at the end," he said.

Phelps will continue his gold medal run in 100m butterfly, 200m individual medley and 4X100m medley relay.