The event had been billed as a battle between world number one Javier Culson and Britain's world champion Dai Greene, but Sanchez stormed to victory in 47.63 - the same time with which he won the title in Athens in 2004.
Asked what the reaction would be back home in the Dominican Republic, 34-year-old Sanchez said: 'It's going to be huge. They expected the Worlds (he won the World Championship in 2001 and 2003), but no-one expected this.
'A lot of people said I should retire but I stuck with it.'
USA's Michael Tinsley took a surprise silver medal in a personal best of 47.91, with Culson forced to settle for bronze and Greene down in fourth.
'It was a very bad run on my behalf,' said Culson, who won Puerto Rico's first-ever Olympic Athletics medal.
'I'm not pleased with it at all. I lost my rhythm towards the end of the race and I couldn't get it back. I send my apologies to the people back home, but at least I made it to the final.'
In the men's 400m, Grenada's Kirani James added Olympic gold to his world title with a brilliant national record of 43.94, with Luguelin Santos winning silver for the Dominican Republic in a final which did not feature a single USA athlete.
Elsewhere, defending champion Elena Isinbaeva had to settle for bronze in the Pole Vault final.
The USA's Jennifer Suhr claimed gold on countback from Yarisley Silva of Cuba after both had cleared 4.75m, with Isinbaeva clearing 4.70m.
Isinbaeva said: 'I am really happy, it's like a gold medal for me. I think this tells me "Don't quit" as I planned to after London.'
In the women's Shot Put, Nadzeya Ostapchuk of Belarus won gold ahead of New Zealand's Valerie Adams after dominating the competition with four throws over 21m.
'I'm very happy,' she said. 'It's my third Olympic Games and it's been a long road to get to this gold medal. This is to everyone in Belarus, I would like to say a huge thank you to all of them.'
Russia's Yuliya Zaripova won the 3000m Steeplechase in a new personal best of 9:06.72.