Muhammad, 26, stormed home by several meters to take the line in 52.88 seconds, easily outstripping the previous season best of 53.51sec set by Shamier Little.
Ashley Spencer was second in 54.02sec while high school student Sydney McLaughlin was third in 54.15.
Muhammad, the 2013 World Championships silver medalist, collapsed on the track in delight after a superb performance which saw her shave around a second off her personal best.
Meanwhile McLaughlin will celebrate her 17th birthday on August 7 in Rio.
McLaughlin held her nerve brilliantly to claim her third place finish in a junior world record time.