The 21-year-old Asian champion denied Olympic icon Phelps a fourth straight victory in the event, leading from start to finish to win in an Olympic record of 50.39sec.
Phelps, sixth at the turn, couldn't pull off one of his trademark comebacks, but he had plenty of company on the second step of the podium as his longtime rival Laszlo Cseh of Hungary and South African Chad le Clos both matched his time of 51.14sec in an astonishing three-way tie for silver.
"It's wild," said Phelps. "Chad and I have had some races over the last four years and Laszlo and I - I can't even remember when I first raced him... So it's kind of special and a decent way to finish my last individual race."
The tie with Phelps was the closest Cseh has come to the US star in Olympic competition. In three prior Games the Hungarian had claimed five medals, all silver or bronze in races won by Phelps.
Phelps's rivalry with Le Close blossomed more recently, at the 2012 London Games where the South African beat Phelps in the 200m butterfly only to fall to him in the 100m fly.
He punched the water and bellowed as Phelps swam over to congratulate him.
"He said 'good job, that was a great race'," Schooling said. "I told him to go four more years and he said 'No way.'
"Hopefully he changes his mind. That was fun. I like racing Michael."
Phelps, 31, insists he won't be back for a sixth Olympics. But after winning four golds so far in Rio -- in the 4x100m free and 4x200m free relays, the 200m butterfly and the 200m individual medley -- he'll have a shot at one more -- it would be his 23rd -- on Saturday in the 4x100m medley relay.
Phelps may have been beaten, but the United States raked in plenty of gold on the penultimate night of action at the Olympic Aquatics Center.
- World record for Ledecky -
============================
Katie Ledecky obliterated the field and her own world record in winning the 800m freestyle in 8min 04.79sec.
The 19-year-old is the first Olympian since Debbie Meyer in 1968 to win the 200m, 400m and 800m free titles in one Games.
"The goal was 8:05 or better so I hit all my goals right on the nose this week," said Ledecky, who improved the previous record of 8:06.68 she set in January.
American Anthony Ervin won gold in the men's 50m free -- 16 years after tying for gold in the same event in Sydney with teammate Gary Hall jr.
Defending champion Florent Manaudou of France was quick off the blocks but Ervin and teammate Nathan Adrian were close behind and Ervin powered into the wall to beat the Frenchman with a time of 21.40 to 21.41. Adrian was third in 21.49.
American Maya DiRado denied Hungarian Katinka Hosszu a record-equalling fourth individual gold in a 200m backstroke thriller.
The American got her at the finish, with a time of 2:05.99.
Hosszu, trying to join Kristin Otto as the only women to win four individual swimming golds in a single games, was timed in 2:06.05.
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