Fellow Brit Carl Hester on Uthopia had led the dressage individual table at the halfway mark of the two-day event after being awarded 77.72, with teammate Laura Bechtolsheimer on Mistral Hojris second with 76.839.
But Dujardin impressed judges on Valegro in the second session to move top, with Hester finishing fifth, Bechtolsheimer in sixth and Richard Davison on Artemis qualifying in 18th with a score of 72.812 for the grand prix special on Tuesday.
Dujardin’s record-breaking score has also aided Team GB’s bid for their first medal in a dressage team event as, averaged with Hester’s and Bechtolsheimer’s, they scored 79.407 to qualify top.
The 27-year-old, who is the youngest of the dressage team, labelled setting a new record in her Games debut as unbelievable.
“I wanted to come here and have fun. I wanted to go out and show what this horse can do,” said Dujardin.
“I loved every minute. When you finish your final halt it is wonderful. The applause is just amazing and I want to thank everyone who supported us.
"You wait a lifetime to get here and I would not want to spoil it by putting too much pressure on myself. It went pretty much to plan, Valegro tries and he hates to get it wrong. He always wants to please you."
Making his fourth Games appearance – after missing out on Beijing as he took the role of non-competing team captain – Davison was delighted to perform in front of a home crowd in his return to the Olympics.
"I have been around the world a few times but believe me this is the greatest arena I have ever ridden in in my life," he said.
"I have never had so much support. It is important to pay back tributes to the fans. I want to get to the next round and do the best by my horse."