The sprinter ran the distance in a time of 9.77 seconds at a meet in Athens.
The 22-year-old eclipsed the previous world standard by 0.01 seconds, set by American sprinter Tim Montgomery in Paris nearly three years ago.
Powell set the record on a track that was the scene of one of his greatest disappointments. Last September, he arrived in Greece as the favourite to win the men's Olympic 100m title. He finished fifth.
Asafa Powell of Jamaica runs in the 100 metres during an IAAF Super Grand Prix meet at the Olympic Stadium in Athens on Tuesday. Powell set a new world record with 9.77 seconds. (AP Photo/Thanassis Stavrakis)
"I'm very happy that ... I achieved this performance," Powell said after the race. "I knew I could break the world record and I am very happy I succeeded."
Last week, Powell won a meet in Czech Republic, clocking a time of 9.85. When asked by reporters if a new world record was on the horizon, Powell said: "Yeah, it's coming."
Powell came into the race as the top sprinter in the world this year. He'd already set the world's fastest time this season, running a 9.84 at a meet in Jamaica last month.
That was third-fastest time ever, tying the mark held by Canadians Donovan Bailey and Bruny Surin.
Powell told the BBC he would have broken Montgomery's record in Jamaica if weather conditions had been better.
"I'm surprised that the time was so fast because the weather was so bad and I eased up in the last 15m and for sure that cost me the world record," he said.
