Arrogate was running so well, jockey Mike Smith admitted he let his horse "gear down" over the final 100 yards on his way to winning a cool $7 million for his connections.
Shaman Ghost was second, five lengths back, and Neolithic finished third as Chrome, ridden by jockey Victor Espinoza, trailed home ninth.
"Another incredible performance," Smith said, referring to this victory and Arrogate's win in November's epic Breeders' Cup Classic where he had an epic duel with California Chrome.
There were 12 horses running, and their owners paid $1 million each to make up the richest pot in horse racing history.
The new race ends the two-decade reign of the $10 million Dubai World Cup
atop the prestige stakes and attracted the support of a number of celebrities, including UFC champion Conor McGregor, who appeared in a much talked about promotional video.
Most eyes were transfixed on top-ranked Arrogate and No. 2 California Chrome, who was seeking revenge in his final race before retirement to stud.
The 2014 Kentucky Derby winner had been chased down by the newcomer at the Breeders' Cup, but there was to be no repeat of that duel this time with reports he needed an x-ray on his right knee.
"He looked listless, I don't know why. It's the first bad race he has ever run," said trainer Art Sherman.
"Chrome just didn't fire," winning jockey Smith said.
A total of 12,000 racegoers attended the race at Gulfstream Park in Hallandale Beach, Florida, just north of Miami.