Kelly, who suffered heartbreak at the Atlanta Olympics when he messed up the start and failed to qualify from the first round, beat Germany's Soren Lausberg by 18 thousandths of a second.
The 24-year-old Australian, who won in Colombia last year, was satisfied but said that he was disappointed that Florian Rousseau the Olympic champion from France was not in Manchester to compete against him.
"This was not revenge for Atlanta. It would have been if Rousseau had been here but he was not. In Atlanta he did not beat me and I have not beaten him here," Kelly, the world record holder, said.
Lausberg, 26, pressed him all the way but had to be satisified with silver while his compatriot Jan Van Eijden took bronze.
Marty Nothstein of the United States took gold in the Keirin, the other final on the first night of the championships -- regaining the title he won in Palermo in 1994.
Nothstein, 25 and silver medallist in Atlanta, edged out veteran Australian Gary Neiwand with defending champion Frederic Magne of France taking bronze.
Germany's triple winner of this title Michael Hubner failed to end his glorious career on a high note finishing fifth.
He fared better than compatriot Jens Fiedler. The double Olympic champion was disqualified for dangerous cycling in the semi-final.
Boardman, defending his title, produced a remarkable first-round display to slice more than six seconds off the world 4,000 metres pursuit record with his first competitive ride using the 'Superman' position he believes should be made illegal.
The 28-year-old Olympic time-trial bronze medallist, who said the world record would tumble in the morning heats, was just a shade slower in his quarter-final after which he revealed he could have broken his record if he had wanted.
"I could have done it," said Boardman, who has adopted the arms fully-stretched riding position invented by Scotsman Graeme Obree.
"It was warmer and the conditions were more conducive. But if I keep on breaking records I'll lose sight of what I'm here for and that's winning the championship.
"We decided to go for the time in the early round and just get it out of the way. Then after that we could concentrate on winning the title."
Boardman, born just a few miles up the road from the Manchester velodrome, switched to Obree's revolutionary position for these championships and for an attempt on the world hour record at the same velodrome next week.
He delighted a sparse crowd by eclipsing the record which was only established by Italy's Andrea Collinelli on his way to inheriting Boardman's Olympic crown in Atlanta last month.
Boardman, who decided not to compete in the pursuit in Atlanta because the Tour de France finished just a few days earlier, clocked four minutes 13.353 seconds -- compared to the Italian's Games time of 4:19.699.
He returned just a few hours later to progress to Thursday's semi-final with another astonishing time of 4:14.784. The final follows a couple of hours later.
Boardman should now claim Britain's fourth successive world pursuit title following his 1994 win which sandwiched two triumphs by Obree, who pulled out of these championships on medical advice.
The initial signs did not look good as Germany's Jens Lehman opened up a second advantage in their first-round heat as the world championships returned to Britain after a 14-year absence.
But Lehman, who was beaten by Boardman in the 1992 Olympic final in Barcelona, was quickly caught by the relentless power of his old adversary.
"I'm very motivated by the fact that the championships are taking place in what is virtually my home town," said Boardman.
After breaking the world record 4,000 metres by more than six seconds with a time of 4:13.353 in the qualifying round, he is seeded to meet Olympic champion and deposed record holder Andrea Collinelli in the final on Thursday.
Boardman eased off in the man-to-man quarter finals but still recorded the second fastest time ever, 4:14.784, while Italy's Collinelli won his match in 4:17.551.
``You can go on collecting world records, but my aim is to take the world title, so I conserved my energy,'' said Boardman, who will be attacking Tony Rominger's world hour record at Manchester on September 6.
``This is a very fast track, and it's also my home stadium, being only an hour away from my house,'' the Merseyside rider added.
The first title of the five-day championships went to American Marty Nothstein, who won the keirin event.
The Philadelphia rider last held the keirin championship in 1994 but could not defend last year because of a knee injury.
Nothstein staged a late burst to take the final by the width of a wheel from Gary Neiwand of Australia and Frederic Magne of France.
Shane Kelly of Australia retained his world one-kilometre time trial title with a track record time of one minute 2.777 seconds.
Kelly averaged 57.345 kph to beat Soren Lausgberg of Germany by 0.18 seconds.
Defending champions Silvio Martinelli and Marco Villa of Italy had no difficulty in retaining the 50-kilometre madison title.
They finished nine points clear of Australia's Scott McGrory and Stephen Pate, who snatched the silver from Kurt Betschart and Bruno Risi of Switzerland in the final sprint.