Radcliffe finished in two hours, 15 minutes and 25 seconds, besting her previous mark set six months ago in Chicago by 1:53.
London Marathon officials placed eight male pacesetters into the women's race, making it a mixed field eligible for world-best marks, according to the IAAF, track and field's governing body.
The 29-year-old Radcliffe moved ahead of the field at the start and clocked 5:10 on her first mile, which was nearly her average pace throughout the race.
Catherine Ndereba of Kenya finished second in 2:19.54.
Deena Drossin of the United States was third in 2:21.16, surpassing the previous American best of 2:26.53 set by Joan Benoit in 1985.