Competing in her first final of the Games, the 17 year old world champion was defending one of her two Paralympic titles and had qualified fastest with a European record in the morning heats.
USA’s world record holder Victoria Arlen took the race out with the Briton in tow and it soon became clear it would be a two-horse race with both swimmers way under world record pace.
Arlen led for the first 350m but Simmonds was fired on by a raucous crowd and edged past her rival in the final length, touching in five minutes 19.17 seconds with the American home in 5:20.18.
The old world marker of 5:24.46 was obliterated by both swimmers and Simmonds admitted she was expecting the race to come down to the wire.
"I knew it was going to be so tough leading in to it," said Simmonds. "I knew Victoria is on form so I knew I would have to give it absolutely everything I've got.
"That last 50m hurt like you wouldn't believe but I was so pleased to touch with no regrets. I literally had no energy left – that was one of the toughest races of my life so far.
"I can't wait to see my coach now and my family and friends. I'm so excited and so happy right now."
Simmonds’ ParalympicsGB teammate Natalie Jones was also competing in her first final of London 2012 and improved on her heat time to finish seventh in 6:02.02.
Claire Cashmore claimed the best Paralympic medal of her career to date as she clinched silver in the SB8 100m Breaststroke.
After qualifying fastest for the final, the world silver medallist was just 0.02 seconds shy of her British record as she clocked a season’s best 1:20.39 to touch second behind Russia’s defending champion Olesya Vladykina who broke the world record with 1:17.17.
Cashmore has now won medals at three consecutive Paralympics, having won two bronzes on her debut in 2004 as well as 100m Breaststroke bronze in Beijing four years ago.
"I felt really confident coming in to these Games," said Cashmore. "I'm probably in the best shape I've ever been. I've done such hard training this year.
"It didn't quite pay off to how I expected but to come away with a silver medal is better than Beijing and Athens so I've got to be happy with it.
"I'm one of those people who is never quite satisfied but tonight I can be satisfied with that."
Matthew Whorwood retained his SB6 400m Freestyle bronze medal with a season’s best performance in the final in London.
The world silver medallist was in clear water for the majority of the race with Ireland’s Darragh McDonald powering clear to win gold in 4:55.56 ahead of Sweden’s defending champion Andreas Olsson in 5:03.44.
But Whorwood stuck to his pace and held on to third, clocking the second fastest time of his career to touch in 5:11.59.
Anthony Stephens set a season's best to finish fourth in the S5 200m Freestyle final.
Competing at his third Paralympic Games, the Briton couldn't quite match the speed of the podium finishers but held off Ireland's fast-finishing James Scully to come home in 2:49.83.
Sascha Kindred finished an agonising fourth in the SB7 100m Breaststroke final after Australian Blake Cochrane broke his own world record to take the gold in 1.18.77.
Despite a determined fight back Kindred couldn’t catch Tomataro Nakamura of Japan and Matthew Levy of Australia and he came home in 1.23.53.
An inconsolable Kindred said: “I gave 100 per cent in that swim and I can’t do much more than that.
“I’ve got a lot of respect for the medallists as defending champion from Beijing, they knew what I was about and they stepped up and performed better on the day.
“I just have to move on from this now and concentrate on my next race on Monday.”
Tom Young was in fifth in the same race in 1.23.69 – a new personal best.
James Crisp set his second personal best of the day to finish sixth in the SB8 100m Breaststroke final.
The 29 year old, who won S9 100m Backstroke silver on day two, came home in 1:15.71 while British teammate Sam Hynd was seventh in a season’s best 1:16.64.
Gemma Almond improved on her heat swim to finish eighth in her second final of her debut Games.
Swimming from an outside lane, the 19-year old clocked 1:13.24 in the final – the second fastest time of her career behind her British record 1:12.26 from earlier in the season.
Rhiannon Henry finished in seventh place in her 50m Freestyle event in 29.41 seconds.
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