The 24-year-old took the lead in the last five meters, beating world record holder, Australian James Turner.
Stedman claimed first place for the first time in his career, setting a national record of 53.36 seconds. World record holder and Paralympic champion James Turner of Australia settled for silver, finishing 0.16 seconds behind Stedman, and Fakhr Eddine Thelaidjia of Algeria took bronze in 54.53 seconds.
It was New Zealand's first gold medal for the world champions in Kobe, Japan. Dunedin Paralympian Anna Grimaldi capped a memorable day with bronze in the 100m T47.
Stedman has been on the 400m T36 podium four times at world championships, but his win on Sunday was his first gold medal.
Stedman was in fourth place with 200 meters to go but timed his sprint to the finish brilliantly, passing Turner with a huge lunge before falling to the ground over the finish line.
He also shaved 0.19 seconds off his national record.
Stedman, who at 16 was the youngest member of the para-athletics team to compete at the Rio 2016 Paralympic Games, claimed bronze at the world champions in 2019 and then silver in 2023.
“It was as close as it could get to a perfect race,” he said.
“I came out well and ran a good first 200 meters, staying nice and relaxed.
“Then I started pushing around the corner and in those last 100 meters I just focused on being relaxed.
“It wasn't until fifty meters away that I saw Jimmy (Turner) coming closer and I thought something could happen here.
“In the last ten meters the momentum managed to carry me through, even though my legs were completely destroyed.
“I'm really happy with the way I ran that race, in these conditions and to run a PB is really cool.''
Grimaldi won bronze in the women's T47 100 meters in Kobe last night with a time of 12.72 seconds in wet conditions.
The 27-year-old, who won her first bronze at the world championships last year, finished behind Kiara Rodriquez of Ecuador, who defended her title in 12.27 seconds, and number two Saska Skolov of Serbia, who was 0.07 seconds ahead of Grimaldi. .
“I'm so happy,” said Grimaldi.
“My first thought is that I know I can run faster, which is exciting for the Paralympics. I'm happy with where I am now, but excited about where I can get.”
Grimaldi returns to action in her specialist long jump event on Friday (1.30pm NZT).
It capped a momentous day for New Zealand after Will Stedman was crowned world champion in the men's T36 400m.
Danielle Aitchison is the only Kiwi competing today, racing in the women's 100m T36 final at 10.22pm.
By means of RNZ And [email protected]