Sea The Stars became the first horse since 1989 to follow up a win in the 2,000 Guineas with victory in the Derby as he produced a stunning run at Epsom.
Jockey Mick Kinane, 49, triumphed in the Classic for the third time with a marvellously patient ride on the 11-4 shot for Irish trainer John Oxx.
Rival Aidan O'Brien had half of the 12 entries, but had to settle for second place with Fame And Glory (9-4 fav).
Masterofthehorse, also trained by O'Brien, stayed on to take third.
In the last 10 minutes before the off, a torrent of cash went on the only unbeaten colt in the field, Fame And Glory. One punter had two separate bets of £50,000 on course, and that meant the Derrinstown Stud Trial winner dislodged Sea The Stars for favourite.
The two Irish-trained colts looked terrific in the paddock and they travelled along sweetly in the centre of the field as Golden Sword made the early running alongside Age of Aquarius.
But Seamie Heffernan did not get Fame And Glory settled as early as Kinane did on Sea The Stars - and that proved crucial.
As the horses headed for the line, he was the first to run down the pace-setters, and though Fame And Glory also picked up pace he could not lay down a genuine threat to the winner.
Oxx, whose sole previous success in this race had come in 2000 with Sinndar, said afterwards the horse was unlikely to attempt the Triple Crown by going for the St Leger - a feat last achieved by the incomparable Nijinsky in 1970.
But he has already matched the achievements of Nashwan in winning both the one-mile Classic for three-year-olds at Newmarket, and then this.
Kinane and Sea The Stars (centre) ease to victory ahead of Fame And Glory and Masterofthehorse
The one doubt lingering over Sea The Stars' credentials before the race was his stamina: would he get the extra half-mile on the notoriously awkward Epsom track?
But his dam Urban Sea had won an Arc and there was no sign of him stopping as he crossed the line.
Masterofthehorse made up plenty of ground from the rear while Rip Van Winkle, chosen by O'Brien's lead jockey Johnny Murtagh ahead of Fame And Glory, got going all too late and crossed the line fourth.
Veteran Kinane, following up his success on Commander in Chief (1993) and Galileo (2001), said: "I was going so easy all the way, it was as if we were going in slow motion.
"That's the key to him - he has serious tools, over any trip. When this lad came along last May I thought I'd better hang around a bit longer!"
The horse came home in the slowest time since 2002, but the track had been softened by considerable overnight rain which lasted into the first race of Saturday's card.
Oxx had only ever entered two horses in the race prior to this one, Sinndar and Alamshar (third in 2003) said: "He impressed us a yearling before he came to us, he just had everything.
"He's never let us down right from the word go. Some horses look the business and then let you down but this fellow has never let us down.
John Oxx discusses Sea The Stars' future plans
"I was never very anxious at any time during the race because he was going so well and as he improved down the hill I could see Mick was waiting, waiting, waiting.
"When he sent him on I knew he wouldn't stop as he'd been going too well for too long. He idles a bit in front, he's the same at home."
Oxx said the St Leger, run over 14 furlongs, a quarter of a mile further than the Derby, might be a "bridge too far".
He explained: "I'm a believer in the Triple Crown, I think it will be won within the next 10 years with all these good middle-distance stallions about, but if we were worried about the trip for the Derby I think we'd be very worried going into the Leger.
"We'll have to talk about it of course but this lad will be very good over a mile, and 10 furlongs. The International at York and the Champion Stakes at Leopardstown are obvious races and there is also the Irish Derby to think about."
Sea The Stars' owner Christopher Tsui, a nightclub owner aged just 27, had flown in from Hong Kong to see the colt race for the first time.