Rupp, already the trials' 10,000m winner, surged past former world champion Lagat in the closing five metres for the upset victory as a delighted crowd cheered him on in his former university's stadium.
The 26-year-old Rupp clocked 13 minutes, 22.67 seconds to shatter late American icon Steve Prefontaine's meet record by 0.15 seconds.
Lagat was less than a stride behind in 13:22.82. Lopez Lomong claimed third in 13:24.47.
Other winners on the cool day included US record holder Brad Walker with a clearance of 5.67 metres in the pole vault and Lance Brooks who threw 65.15 metres in the men's discus.
Long jumper turned sprinter Tianna Madison cruised through the rain to the day's fastest time as qualifying began in a highly anticipated women's 200.
Madison, the 2005 world long jump champion, clocked 22.57 seconds to win her heat as she worked to make the US team for London in a second event. She was second in the 100 metres earlier in the trials.
World 100m champion Carmelita Jeter, Sanya Richards-Ross, Allyson Felix and Jeneba Tarmoh also were among those who advanced.
Jeter, the 100m trials winner, sprinted home in 22.63, the second fastest time, to take her heat with Richards-Ross, already on the US team with a win in the 400, clocking 22.67 for third fastest.
Two-times Olympic silver medallist Felix and training partner Tarmoh, the two sprinters involved in a controversial dead heat for third place in the 100m, posted the sixth and eighth fastest qualifying times. Felix ran 22.82 and Tarmoh 22.90.
The sprinters must decide by Sunday whether they would like a runoff or a coin flip to break their 100 metres tie.
World champion Christian Taylor easily led qualifying in the men's triple jump, bounding 17.27 metres on his only attempt.
Global indoor winner Will Claye was second best at 16.80.
Olympic silver medallist Kerron Clement showed he is still a contender in the 400 hurdles, leading qualifying with a run of 49.37. The Olympic champion, Angelo Taylor, was second fastest at 49.53.
World champions Lashinda Demus (400 hurdles) and Jenny Simpson (women's 1,500) also advanced through qualifying. Demus ran 55.29 and Simpson 4:16.70.
The trials continue through Sunday with the top three finishers in each event booking tickets provided they have met the Games' qualifying standard.
1. Galen Rupp 13:22.67
2. Bernard Lagat 13:22.82
3. Lopez Lomong 13:24.47
Men's 3000m Steeplechase
1. Evan Jager 8:17.40
2. Donn Cabral 8:19.81
3. Kyle Alcorn 8:22.17
Men's Pole Vault
1. Brad Walker 5.67
2. Jeremy Scott 5.60
3. Scott Roth 5.60
Men's Discus Throw
1. Lance Brooks 65.15
2. Jarred Rome 63.35
3. Jason Young 62.15
1. Julie Culley 15:13.77
2. Molly Huddle 15:14.40
3. Kimberley Conley 15:19.79