The 29-year-old took more than a tenth of a second off a record that had stood for 16 years, clocking 52.20 seconds to beat Russian Yuliya Pechonkina's previous mark of 52.34.
"I'm just shocked," said Muhammad.
"I've been kind of hitting that time in practice and my coach was like 'there's no way you can't do it'."
Nineteen-year-old Sydney McLaughlin was second in 52.88 and Ashley Spencer third in 53.11. All three qualified for the World Championships in Doha in September, where they will be joined by reigning world champion Kori Carter in a formidable US quartet.