Defending Olympic champion, Cameron van der Burgh of South Africa was seventh, 1.8 seconds adrift of Peaty.
Peaty set a new mark of 57.55 seconds - cutting 0.37 from his previous record, set in London last year - and said he hoped to shave off some more in Saturday's semi-finals.
"Going down that first 50, I knew it was fast, and I knew I turned fast. It wasn't until 25 metres to go, the crowd started to roar and it was like, there are no Brazilians in this race and they've got to be shouting for something," the 21-year-old told reporters.
"Hopefully tonight I'm going to feel a little bit better and swim a little bit faster... We're going to keep pushing the boundary."
World champion Peaty, swimming at his first Olympics, is seeking to become the first British male swimmer to win Olympic gold since Adrian Moorhouse in the same event in 1988, six years before Peaty was born.
Japan's Yasuhiro Koseki set the second-fastest time in the heats, 1.36 seconds behind Peaty. Brazilian Felipe Franca raised a big roar from the home crowd by qualifying third, a further tenth of a second behind.
Defending Olympic champion Cameron van der Burgh of South Africa was seventh, 1.8 seconds adrift of Peaty, and will have his work cut out in the semis and in Sunday's final.
However, he rejected any suggestion he might be demoralised by his rival's record-breaking form.
"For me there's no use expending any extra energy that I don't need to, so it's worked pretty well and that's my gameplan and I'll still be sticking to it," he told reporters.
"You know, we see guys smashing times in semi-finals and crumbling in finals... Obviously an Olympic final's a different animal, it's something really spectacular."