US starlet Vonn, who has a commanding overall World Cup lead and has already claimed the season's downhill title, was second at 0.48sec back with Sweden's Anja Pärson a distant 1.13sec behind.
Riesch blazed down the 3km-long Kandahar course in front of her home crowd and the double Olympic gold medallist smashed 1.22sec off the previous fastest time in a winning mark of 1min 34.82sec.
With her home crowd giving her plenty of vocal support, Riesch was ecstatic after shooting over the finish-line and delighted with her time with the world championships to be held here in February next year.
"That was great, it was crazy to get such a time," said the 25-year-old from Garmisch, who won combined and slalom golds in Vancouver last month, with three races still to come here.
"I was very motivated and I wanted to produce a good performance with the world championships next year. If Lindsey finishes half a second behind me, that has to signify something."
Having won a downhill gold and Super-G bronze at the Vancouver Games, Vonn is virtually uncatchable at the top of the overall standings with a huge 1571 points, while Riesch is second on 1346 with Paerson in third with 982.
"With regards to the overall world cup title, I must be realistic," said Riesch. "I have only made up 20 points - there are still nearly 250 points between us, so nothing has really changed at all."
The women's giant slalom takes place on Thursday, with the Super-G on Friday and the slalom - in which Riesch is the reigning Olympic and world champion - taking place on Saturday.
"It is not out of the question that Maria can still win, but things will be tough," said Vonn when asked about whether Riesch can still win the overall title after the German insisted the contest is over.
"Maybe I will not pick up any points over the next three races, who knows, you can't take anything for granted. It's not over yet, Maria says it's over, but it's not over, until it's over."