The previous record of 3:34:14 was set by Russia's Denis Nizhegorodov in Cheboksary in May 2008.
The ecstatic 36-year-old Diniz even had time to stop for a few seconds to collect a Portuguese flag from a fan and also waved a French flag as he crossed the finishing line for his third successive European title in Zurich.
"I started off cautiously, with the rest of the pack and as usual I had pins and needles in my legs," Diniz said, who won the fourth gold medal at the championships for France.
"I caught the Russians and asked myself if I had made a mistake because I did the same thing at Moscow (10th at 2013 world championships)," said Diniz,
"I felt very fluid with my technique and very relaxed and I could see that the Russians were not walking very consistently so I preferred to pull away a bit and get my times down to four minutes, 20s seconds a kilometre which I knew I had in my legs," he said.
"I knew I could go a lot faster and I worked on everything from the fifth kilometre to the 50th."
In changeable weather conditions, Diniz had to cope with rain, sun and wind as he seized control of the race with 14 kilometres to go.
He strode away to finish three minutes and 48 seconds in front of Slovakia's Matej Toth with Russian Ivan Noskov claiming bronze, a further one minute and 20 seconds back.
Diniz's previous best time and the French record dated back to 2009 at Dudince, Slovakia when he clocked 3:38:45.