The 33-year-old, who won the individual pursuit on Thursday, was the only woman to break 37 seconds, setting a new personal best.
Jennifer Schuble of America had set the standard with a time 37.941s.
No woman could beat that time, despite Paralympic and world records for Susan Powell of Australia and Jianping Ruan of China respectively. Both athletes were in the C4 class and their factored times could not displace Schuble.
Last to ride was Storey, who gradually increased her speed over the first lap and half before powering home to take gold in a time of 36.997s.
Her time was not factored, as it had been in Beijing but she said she had to get the job done.
"Anything can happen in these races," Storey told Channel 4. "You've got to get the job done, regardless of the factored times.
"The crowd are amazing. It's like your family has grown by 6,000 people. I feel privileged to have won in front of them."
Storey's husband Barney had won gold earlier in the day as pilot with Neil Fachie in the men's 1km time trial.
Her gold puts ParalympicsGB top of the track cycling medal table.
Storey will also compete in the road time trial later in the week.