In a thrilling final of the 400m Freestyle - S6, defending champion Simmonds, 17, was only 0.08 ahead at the final turn.
But she pulled away on the final length and her USA rival, also 17, had no answer as Simmonds touched first to send the crowd into a frenzy.
Simmonds, who clocked 5:19.17 to beat Arlen's world record by more than five seconds, said: 'I'm exhausted. I can't believe I did it. It was so tough. I saw her (Arlen) on the last 100 and I was like, "I'm going to have to put my head down" and I thought, "I'm going to do it for for everyone who's supported me".'
Sophie Pascoe had set five world records before tonight when she managed to break two more in the same race, the 100m Butterfly - S10 in 1:04.43 and with the opening length a 50m record of 29.57.
Olesya Vladykina lowered her own Breaststroke - SB8 record to 1:17.17, while Cecilia Camellini added the 50m Freestyle - S11 mark to the 100m she set last night in 30.94.
Yang Bozun set a new mark of 25.27 in the 50m Freestyle - S11, and Blake Cochrane dipped under his own 100m Breaststroke - SB7 mark in 1:18.77.
Oscar Pistorius returned to London and to Paralympic competition with a new world record tonight in the Olympic Stadium.
The South African, who last month became the first amputee sprinter to compete in an Olympic Games, clocked 21.30 to win his heat of the 200m - T44 with effortless ease.
Britain's Richard Whitehead blitzed the final 100m of his 200m - T42 race, coming from well down the field to smash his own world record, flexing his biceps as he crossed the line in 24.38.
There were two Irish Athletics gold medallists in the Olympic Stadium, with Jason Smyth winning the men's 100m - T13 in a world record 10.46 and Michael McKillop cruising to victory in the men's 800m - T37.
Great Britain won two gold medals at the London 2012 Velodrome.
After Barney Storey piloted Neil Fachie to win the men's Individual B 1km Time Trial, his wife Sarah Storey won the women's Individual C4-5 500m Time Trial, finishing almost a second ahead of Jennifer Schuble of the USA.
In the women's Individual C1-2-3 500m Time Trial, He Yin of China won gold in a world record of 42.448, factored to 39.158.
Carol-Eduard Novak of Romania won the men's Individual C4 Pursuit in 4:42.000 after qualifying in a world record. The equivalent C5 event saw Australia's Michael Gallagher win gold in 4:35.297.
Australian Paralympic debutant Joann Formosa pulled off a shock by beating gold medal favourite Lee Pearson in the Dressage Grade Ib at Greenwich Park.
Formosa, 13 years Pearson's senior, scored 75.826 per cent aboard Worldwide PB and Pearson and Gentleman had to settle for second on 75.391, just in front of Austrian Pepo Puch and Fine Feeling with 75.043.
Britain did have a gold to celebrate today, with 22-year-old Natasha Baker scoring a Paralympic Grade II record 76.857 on Cabral.
Cuban Jorge Hierrezuelo Marcillis beat Britain's Sam Ingram to take the -90kg Judo crown in front of a raucous crowd at the ExCeL. The match went the full five minutes but Marcillis won by a yuko.
Republic of Korea's Choi Gwang-Geun won the -100kg category, beating Myles Porter of the USA in the final.
Japan's Kento Masaki won the men's +100kg category with an ippon over Wang Song and Chinese judoka Yuan Yanping beat Turkey's Nazan Akin in the women's +70kg.
Maria del Carmen Herrera Gomez of Spain beat Tatiana Savostyanova of Russia in the women's -70kg final to claim her third Paralympic title.
Frenchman Cedric Fevre took gold in the Mixed R3-10m Air Rifle Prone - SH1 with a total of 706.7, edging out Britain's Matt Skelhon who was 0.3 behind.
Earlier, Ukraine's Vasyl Kovalchuk took gold in the Mixed R5-10m Air Rifle Prone - SH2. Frenchman Raphael Voltz won a silver medal shoot-out with Britain's James Bevis.
Esther Oyema and Joy Onaolapo both broke the world records en route to gold as Nigeria's dominance of the Powerlifting continued.
The west African nation have won a medal in seven of the eight categories and boast four golds. Oyema won the women's -48kg with a lift of 135kg. Onaolapo triumphed in the women's -52kg category with a new world record 131kg.
Dutch Wheelchair Tennis star Esther Vergeer demolished Kanako Domori of Japan 6-0 6-0 in 44 minutes to win her first-round Singles match and launch her bid for a fourth consecutive Paralympic title at Eton Manor. It stretched her unbeaten Singles match run to an incredible 466.
At Eton Dorney, Nicholas Beighton and Samantha Scowen won the first repechage in the Mixed Double Sculls - TAMix2x to ensure hosts Britain will have A final representation in the three Rowing events they entered.
In the women's Single Sculls - ASW1x, Moran Samuel of Israel and Claudia Santos of Brazil cruised into the A final.