Liu, who just turned 21, powered home in a smooth, virtually error-free race to match the record set by Colin Jackson of Britain at the 1993 World Championships in Stuttgart, Germany.
Liu's previous personal best was 13.06, which he recorded in May. He won the bronze medal at last year's worlds in Paris.
Terrence Trammell of the US won the silver in 13.18, and defending champion Anier Garcia of Cuba the bronze in 13.20.
Allen Johnson of the US, the four-time world champion who fell in the second round and did not make the final, lost the Olympic record he set in Atlanta in 12.95.
In the morning, Robert Korzeniowski of Poland increased his record collection of gold medals with an unprecedented third consecutive Olympic victory in the 50-kilometer walk.
Korzeniowski, 36, has won four Olympic golds -- the last three in the 50km walk and the 20km event in Sydney. No other walker has won more than one gold medal.
It was the final medal for the Pole, who has announced his retirement after the Olympics.
With the Polish flag clenched between his teeth, Korzeniowski crossed the finish line in 3:38:04 -- more than four minutes ahead of silver medalist Denis Nizhegorodov of Russia.
Russian Aleksey Voyevodin claimed the bronze.
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