The 30-year-old shook off fellow Kenyan Emmanuel Mutai with just under three miles remaining to become the first man to run a marathon in less than two hours and three minutes.
Mutai, who finished second in 2:03:13, also broke the previous record.
"I feel good because I won a very tough race," said Kimetto.
"I felt good from the start and in the last few miles I felt I could do it and break the record."
The previous world record had been set on the same course 12 months ago by Kimetto's compatriot Wilson Kipsang, who ran 2:03:23.
Kimetto, who won marathons in Tokyo and Chicago last year, had promised to attack the record in Berlin if conditions allowed.
And in weather perfect for long-distance running, with temperatures around eight degrees centigrade, Kimetto kept his promise, staying in the lead group throughout and sprinting to victory and a new world's best time.
Mutai, meanwhile, believes a two-hour marathon is possible.
"From what I saw today, times are coming down and down. So if not today, then tomorrow," the 29-year-old Kenyan said. "Maybe next time we'll get 2:01."
Scott Overall was the top British athlete in the men's race, finishing 14th in 2:13:00.
Britain's Shelly Woods won the women's wheelchair race as she continues her preparation for November's New York Marathon.
Kenya's Dennis Kimetto has broken the marathon world record in Berlin, winning the race in a time of two hours, two minutes and 57 seconds.