The 26-year-old recorded a time of one hour five minutes and 12 seconds, beating the previous best of 1:05:50 set by compatriot Mary Keitany in Ras Al Khaimah in February 2011.
Kiplagat's fastest time over the distance before Sunday was 1:06:38, in Ostia in February 2012, and she finished more than seven minutes ahead of second-placed Nicola Duncan of Britain.
"This is a not a day I will forget, I'm so happy," Kiplagat said on the IAAF website (www.iaaf.org).
"The circuit was very fast and I really want to thank my pace makers, Marc Roig and Stanley Siroro, they did a great job," she added.
"I felt so well from the beginning and the weather was perfect, so I had the feeling that this could be a special day."
Frenchman Renaud Lavillenie broke the men's pole vault world record in Ukraine on Saturday and Ethiopian Genzebe Dibaba set the fastest ever women's indoor two-mile time at the British Grand Prix in Birmingham.