Dutch world champion Dafne Schippers, who won silver behind Thompson at the Rio Games, had an electric start from lane five, up quickly on the Jamaican over the opening 50 metres.
Coming into the home stretch, it looked as if Schippers had the victory in the bag, but she pulled up with 10m to run and dipped too early, allowing a strong-finishing Thompson into first in a Diamond League record of 21.85 seconds.
"I came out a winner and I'm happy!" said Thompson. "This is a blast. I came out to execute well.
Schippers was second, just one-hundredth of a second adrift in 21.86sec, the second fastest time of her career bettered only by her 21.63 when winning the world title in Beijing last year.
"The time is really good, I achieved a season's best," said Schippers.
"This year, I had quite a few struggles. I hope to come back stronger next year."
In one of the most stellar fields ever assembled over the women's 200m, American Allyson Felix, who won 200m gold at the 2012 London Games and is also a three-time world champion in the distance, was third in 22.02sec.
European champion and Olympic bronze medallist Dina Asher-Smith of Britain was fourth in 22.38sec, while Jamaican Veronica Campbell-Brown, Olympic champion in 2004 and 2008, had to be happy with sixth behind compatriot and relay specialist Simone Facey.
Between Thompson, Schippers, Felix and Campbell-Brown, the quartet have dominated the women's 200m since 2004, reaping seven of the 12 available medals in the last four Olympics and 10 of the 18 in six world championships over the same period, including nine individual 200m golds.
Lavillenie moves on in style
In the men's pole vault, Frenchman Renaud Lavillenie firmly buried memories of being reduced to tears by a hostile crowd at the Rio Olympics by continuing his domination of the Diamond League.
A weeping Lavillenie became one of the most poignant images from the Games as he struggled with the partisan crowd backing eventual gold medal winner, local hero Thiago Braz.
When the Frenchman, champion at the 2012 London Olympics, was jeered and heckled as he received his silver medal on the podium, tears were seen flowing down his face.
IOC president Thomas Bach, IAAF supremo Sebastian Coe and pole vault legend Sergey Bubka, an IAAF vice president, were among those who rushed to console him.
After leaving the Frenchman, Bach said it was "shocking behaviour for the crowd to boo Renaud Lavillenie on the medal podium. Unacceptable behaviour at the Olympic Games".
Lavillenie himself said at the time: "It's disgusting, there is a total lack of fair-play and I want to stress that the Brazilian (Braz) is not involved at all. But I am going to move on."
And move on he has done, tying with American Sam Hendricks for victory in Thursday's Diamond League in Zurich -- Braz settling for third -- after also winning in Paris last week.
"I won the Diamond League for the seventh time," the Frenchman said of his record streak. "It's super. I'm very proud and very happy."
One of the highlights of the Zurich Diamond League this year was holding the women's pole vault in the main hall of the Swiss city's central train station.
IAAF president Coe has long pushed the concept of "street athletics", taking field events out to the public to widen appeal to a younger audience.
Briton Holly Bradshaw won the event, where the runway was raised to the landing mat, lined on one side by a temporary scaffolded seating area with standing room on the other side and at the far end of the mat.
"Personally I really love street meets. It gets the most out of me and the crowd was amazing," she said, with fans packed in around the runway to make for a special event.
Second-placed American Sandi Morris admitted it was a "very peculiar place to compete, people are very close".
"But I love it! I was feeding off their energy," she said.
Greece's Olympic champion Katerina Stefanidi added: "It's really nice to feel the audience right next to you, but it's very different from being in a big stadium and it takes a little getting used to."