Gay, coming back from a hamstring injury that dashed his Beijing Olympic hopes, ran away from the field to post a time bettered only by Usain Bolt's world record 19.30 set in Beijing, and the 19.32 run by Michael Johnson at the 1996 Olympics.
It was the first 200 metres race of the year for world champion Gay, who had only run two 400 metres events in 2009.
Fellow-American Wallace Spearmon was second in 19.98 followed by compatriot Xavier Carter in 20.27 with Jeremy Wariner another three-hundredths of a second back.
Gay was running the 200 for the first time on US soil since 2008 Olympic trials, where he injured his hamstring.
The Icahn Stadium track has been to Gay's liking. In 2007 he won the 100 in a wind-aided 9.76 seconds. Last year he ran 9.85 to finish second behind Bolt, who set his first 100 metres world record with a time of 9.72.
Former 100 metres world record holder Asafa Powell did not fare as well, finishing seventh in the 100 behind American winner Mike Rodgers, who clocked 9.93 seconds.
Jamaica's Powell ran 10.10. Olympic silver medallist Richard Thompson of Trinidad finished fifth in 10.01.
Jamaican Olympic and world champion Veronica Campbell-Brown was upstaged in the women's 100 by American Carmelita Jeter, who won in a fast, wind-aided (2.8 m/sec) 10.85 seconds.
American Muna Lee was second in 10.88 followed by Campbell-Brown in 10.91.
American Lauryn Williams, who finished fifth in Saturday's 100, came back to win the 200 in a 2009 best 22.34 seconds, ahead of compatriot Shalonda Solomon and Debbie Ferguson of the Bahamas.
Other stellar women's performances on a breezy day included American Allyson Felix's 50.50 in the 400 metres, American Anna Willard's 1:59.29 in the 800, Kenyan Linet Masai taking the 5,000 in 14:35.39 and American Jenn Stuczynski's 4.81 metres in the pole vault.
Micah Kogo of Kenya won the men's 5,000 metres in a season-best 13:02.90 ahead of American double world champion Bernard Lagat and Dejen Gebremeskel of Ethiopia.
