China geared up to sweep five more golds in shooting, weightlifting, diving and swimming, with the most precious gold from Luo Xuejuan, who swam on lane 1 to triumph in the women's 100 m breaststroke final.
China perches atop the medal tally with 10 golds and Australia is second with six, followed by Japan on five and the United States three.
The American Phelps' bid for a repeat of Mark Spitz' seven-title record ended after just three days, as world record holder Thorpe finished with an Olympic record of one minute and 44.71 seconds.
Van den Hoogenband, who upset Thorpe in the 2000 Games, exploded from the pad and was more than one second under world record pace at the halfway mark.
But Thorpe surpassed tiring leader in the homestretch, clocking 0.52 seconds ahead of the Dutchman, while Phelps never caught the top two.
"Take that!" yelled Thorpe when he saw the scoreboard.
"It was tough and I did feel a bit tired," said Thorpe, 400 m freestyle winner at the weekend.
"But I was able to produce a pretty good performance and I'm ecstatic about the result."
Asked what he had told Thorpe when they clapped handed and embraced after the race, van den Hoogenband said: "I told him we were even now."
Luo Xuejuan, only seventh in the semifinals, caught the other finalists by surprise in the women's 100 m breaststroke, beating Australians Brooke Hanson and Leisel Jones into second and third places.
"This is the most unforgettable moment in my life," said a tearful Luo.
"I told her before we came here that you were the best and no one could beat you," said Luo's coach Zhang Yadong.
In the wake of Phelps' failure, the United States fished out two golds from the swimming pool.
Natalie Coughlin claimed the women's 100 m backstroke crown in 1:00.37 and Aaron Peirsol clocked a winning time of 54.06 in the men's 100 m backstroke final.
Earlier, less known Zhu Qinan grabbed China's third shooting gold as he scored a world record in the men's 10m air rifle.
The 19-year-old's winning total of 702.5 points beat the old standard of 702.5 set by American Jason Parker last year. His teammate Li Jie picked the silver on 701.3.
The other shooting title went to Australian Suzanne Baloghm, who overcame a strong wind to win the women's trap in a mediocre score of 88 hits, one ahead of runner-up Maria Quintanal from Spain.
Chinese women weightlifters, who made it four out of four in last Games, opened the account through Chen Yanqing after Li Zhuo missed the 48 kg title last Saturday.
Chen came out of retirement to lift 237.5 kg, a huge 5 kg over the total of DPR Korean Ri Song Hui, who took the silver and her country's first medal.
Shi Zhiyong won China's second lifting gold in the men's 62 kg, totaling a world record weight of 325 kg. Teammate Le Maosheng grabbed the silver with the bronze going to Greece's Leonidas Sampanis.
Chinese divers Lao Lishi and Li Ting, both 17, easily won the women's 10 m synchronized platform with 352.14 points.
Greece took its first gold of this Games thanks to men's 3 m springboard synchronized divers Tomas Bimis and Nikaolaos Sirandis.
The Greek duo were virtually given the gold by pre-meet hopefuls -- Russia's Dmitri Sautin/Troy Dumais and China's Wang Kenan/Peng Bo, who both flunked their last dives to finish seventh and eighth.
The Chinese pair, who led 12.48 points after the fourth dive, scored nothing in their last outing after Wang smashed the water on his back following a failed twist in the air.
Japan pulled off a stunning victory in the men's gymnastics team competition with a total of 173.821 points. United States claimed the silver on 172.933 and Romania took the bronze on 172.384.
Defending champion China came fifth with 171.257.
"Mr. Ippon" Lee Won Hee, world judo champion, landed South Korea's first gold in the men's 73 kg final against Russian Vitaliy Makarov.
Germany's first title also came from the judo mat, where Yvonne Boensich triumphed over DPR Korean Kye Sun Hui in the women's 57 kg bout.
In the individual foil duel, Frenchman Brice Guyart subdued Italian Salvatore Sanzo 15-13.
One day after Yao Ming and his Chinese teammates suffered a 83-58 defeat by their Spanish rivals in a men's basketball game, the NBA star's girlfriend Ye Li was humiliated in China's 75-67 drubbing by the Spanish women's basketball team.
Off Olympic venues, the Court of Arbitration for Sport (CAS) onMonday upheld the expulsion of Kenyan boxer David Munyasia who had turned in the first positive test of the Games.
Bulgaria's top Olympic official, tangled in alleged bid-city corruption, lost his appeal too, against his exclusion from the Athens Games.
The CAS upheld the IOC's decision to revoke Ivan Slavkov's accreditation for alleged misconduct involving the 2012 bid city process.
Disgraced Greek sprinters Kostas Kenteris and Katerina Thanou got another delay from an IOC panel that will decide whether they should be banned for missing a drug test.
(Xinhua News Agency August 17, 2004)