The Plymouth Leander swimmer amazingly won by nearly half-a-second in the one-length event.
He clocked 21.35 seconds, with South African’s Bradley Tandy finishing second in 21.81 and Australia’s Cameron McEvoy third in 21.92 seconds.
In a fast final, young Plymouth Leander swimmer Tom Fannon finished eighth in 22.25 seconds.
Proud’s stunning performance in the freestyle was the perfect way to make up for his disappointment in the 50m butterfly event where he was controversially disqualified.
Proud also came agonisingly close to adding a second gold medal on the final day of swimming at the Gold Coast event.
He anchored the England 4x100m medley relay team. He produced an incredible 47.93 second split but was just edged out on the touch by Olympic 100m freestyle champion Kyle Chalmers, who led Australia to gold in a Games record time of 3:31.04.
England, with Luke Greenbank, Adam Peaty and James Guy making up the team, had to settle for silver in 3:31.13.
Proud had also won a silver medal in the 4x100m freestyle relay.
But he was delighted to retain his individual 50m freestyle title after his disappointment in the butterly.
“When I lost the opportunity to retain my 50m fly title, I really was clinging on to what I had left,” said Proud.
“I’m very pleased with that (the freestyle win). Last night was about the time, but that was all about the medal.
“It’s been a really special night. I am very positive for the rest of the year.”
He added: “To be able to retain this title gives me the energy to be able to come back in four years’ time in Birmingham in front of the home crowd and, hopefully, try and get it for the third time.”
Proud has also been selected to compete for Great Britain at European Championship in Glasgow in August.