Feuz, a bronze medallist at the 2015 Beaver Creek worlds, timed 1min 38.91sec down the slightly shortened Corviglia course, its diabolical 'Free Fall' 45-degree opening kick-out cut over fears of fog that had seen the downhill postponed from Saturday.
"It's my best present, I couldn't dream of more!" beamed Feuz, who celebrated his 30th birthday on Saturday.
"It's unbelievable: in Switzerland at the world championships and I win!"
Erik Guay missed out on following in the footsteps of Hermann Maier (1999) and Bode Miller (2005) by claiming a speed double by just 0.12sec, the Canadian however adding silver to the gold he won in Wednesday's super-G.
"It's absolutely wonderful," said 35-year-old Guay, who has bounced back astonishingly well from a bad crash in Garmisch at the end of January.
"Everything that's happened in the last 10 days, going from Garmisch to winning the super-G to cancelling the downhill and with some fog today...
"It was quite a stressful week for me, but I'm really happy with the way things worked out."
Austrian Max Franz, 27 and with just one World Cup victory to his name, took bronze, 0.37sec adrift of Feuz's pace.
Defending world champion Patrick Kueng of Switzerland shared fourth place with Norway's much-touted and super-G silver medal-winning Kjetil Jansrud, just two-hundredths of a second off the podium.
"It's not a nice place, here in Switzerland at the world championships and you get fourth," acknowledged Kueng.
"Two-hundredths is nothing... but that's life."
Austria's defending Olympic champion Matthias Mayer finished down in 11th (+0.86).
Despite the race starting with fog patches up top, racers soon glided into perfect sunny conditions, a large partisan flag-waving crowd of some 35,000 basking in anticipation in the finish area.
The atmosphere was progressively notched up as each racer trumped their predecessor, to roars from the expectant crowd.
When Kueng matched Jansrud's time before him, many thought the Swiss racer would be the first to defend his world downhill title since Bernhard Russi in 1972.
But it was not to be as Feuz, starting with bib number 13, laid down an amazing run with speeds touching 125kph to take him down a piste on which he won both the super-G and downhill at last year's World Cup finals.
Feuz, with Swiss tennis legend Roger Federer looking on, safely negotiated the rolling terrain and three monster jumps with aplomb, picking the right exit lines to become the fourth Swiss skier to claim the downhill title on home snow after Walter Prager (1931), David Zogg (1934) and Peter Mueller (1987).
There was still drama to come, however: first Germany's Andreas Sander threatened up top before fading, before the nerve-wracking descents of Austria's 2015 super-G champion Hannes Reichelt, and then Guay, Franz and Mayer.
Each time their times flashed up red, to indicate the racer was not the new leader, Feuz was left clutching his head before punching the air in relief.