Britain had never won a medal in the sport before but Alistair went into the race as hot favourite having dominated Triathlon over the last four years.
Jonny had been tipped for silver but had to give way to Spain's Javier Gomez, while his hopes were not helped by a penalty for getting on his bike too early.
Richard Varga led out the swim in the Serpentine with the Brownlees, who have been training alongside the Slovakian, in close attendance.
They came out of the water in fourth and sixth but it was two-time world champion Gomez who shot off on the bike and a group of five, including the brothers, quickly formed.
There was heartbreak for Canada's flagbearer Simon Whitfield, the Olympic champion at Sydney 2000 and the silver medallist at Beijing 2008, as he crashed very early on the first lap and was forced to pull out.
By the end of the third lap the Brownlees were at the front, but Jonny's hopes of a medal were hit when it was confirmed that he would need to serve a 15-second penalty.
The pair were second and third into transition and immediately headed out at the front of the run, and Gomez went with them.
By the end of the first lap, the trio already had a 17-second advantage over the rest, but at the start of the third lap it was Jonny who could no longer handle the pace and he dropped back.
Shortly afterwards, the gap began to open between Alistair and Gomez, the Spaniard no longer able to live with the Leeds athlete's incredible speed.
Jonny took his penalty on the third lap and came out still in third place, while Alistair gradually extended his gap and had time to collect a Union Flag before walking across the finish line.