Bindra, a 25-year-old businessman from Chandigarh, followed his world championship title of two years ago by grabbing the men's 10m Air Rifle shooting gold medal.
Athens Games champion Zhu Qinan of China won the silver and Henri Hakkinen of Finland the bronze after one of the most thrilling shooting finals in Olympic history.
Bindra, who trailed by two points after the qualification round, trumped his rivals in the 10-shot final as he went into the last shot level with Hakkinen on 689.7 points.
While Bindra secured his best score of 10.8 in the deciding shot, Hakkinen managed only 9.7 to concede the silver to Zhu, whose last shot was 10.5.
"It's the best feeling of my life," said an elated Bindra, a winner of India's highest sporting award, the Rajiv Gandhi Khel Ratna (sports jewel), in 2001.
"I was just trying to concentrate on shooting, I was not thinking about making history.
"For me life will go on. All my life I have just been punching holes in a blank piece of paper target.
"But I sincerely hope this win will change the face of Olympic sport in India. In our country, Olympic sports are not really a priority, I hope now they will get more attention."
India, a nation of a billion people addicted to cricket, have won eight field hockey Olympic gold medals but had never won an individual title before Bindra's feat.
The previous best was trap shooter Rajyavardhan Rathore's silver at Athens four years ago, while there were bronze medals for wrestler Khasaba Jadhav (1952), tennis star Leander Paes (1996) and woman weightlifter Karnam Malleswari (2000).
Meanwhile, Satu Makela-Nummela of Finland, a 36-year-old mother of two, won the women's Trap gold medal in her maiden Olympic appearance.
Zuzana Stefecekova of Slovakia took the silver, while Corey Cogdell of the United States claimed the bronze after winning a shoot-off with three other competitors.
"It is amazing," said Makela-Nummela. "I did not believe I would win today.
"I could not concentrate in the final because I was thinking of home. But it's good I did not think of the results or who was breathing down my neck.
"That made sure I was not under any pressure."
Cogdell, the youngest of the three medallists at 21, won the shoot-off against a field that included 2000 Sydney Games champion Daina Gudzineviciute of Lithuania.
Of the six shooting golds decided over the first three days of competition, China and the Czech Republic have won two each with India and Finland taking the other two.
