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The American, the most decorated athlete in Olympic history, added to his staggering title tally by overpowering the South African in the Rio final, clocking 1min 53.36sec.
Le Clos, the defending champion, faded badly in the final 50m and finished out of the medals as Japan's Masato Sakai came through for a surprise silver in 1:53.40 with Hungary's Tamas Kenderesi taking bronze in 1:53.62.
World record-holder Phelps, who won the title in 2004 and 2008, celebrated by pointing to the ceiling and pumping his fists, gesturing to the crowd to "bring the noise" after becoming the oldest individual gold medallist in Olympic swimming history at 31.
Competing in his fifth and final Olympics, victory was twice as sweet for Phelps after clashing with Le Clos in the media since losing to the South African in an epic tussle in London.
Phelps won his 19th Olympic gold in the men's 4x100m freestyle relay at the weekend and could win a 21st in the 4x200m free later on Tuesday.
If he feels greedy there is more potential gold for Phelps in the 100m fly and the 200m individual medley -- events he has incredibly won at the past three Olympics.