Australia has won a stunning gold medal in the women's 4x200m freestyle relay, smashing the world record in the process.

The team of Linda MacKenzie (AIS), Stephanie Rice, Bronte Barratt and Kylie Palmer were considered an outside chance of winning a medal.

But a magnificent performance from all four swimmers saw them finish in front of China and the United States.

Rice led the Australians off first establishing a handy lead swimming a 1min56.60 to equal the Australian 200m freestyle record.

She then handed off to Barratt who increased the lead before handing over to Kylie Palmer in her first Olympic swim.

Palmer swam out of her skin and increased the lead before the Institute’s Linda MacKenzie brought it home.

AIS swimmers Angie Bainbridge and Felicity Galvez swam in the heats for the Australian relay team.

Rice has now won three gold medals, all won in world-record time.