The previous Australian mark of 1:44.40 was set by gold medallist Ralph Doubell at altitude at the 1968 Mexico City Olympics and equalled by Alex Rowe in Monaco 46 years later.
"It's a great feeling," said Deng. "My target coming into the race wasn't the record, it was just to run fast.
"I knew it was going to be a fast race. [Coach Justin Rinaldi] said to stick in the top five, top six position and see what happens.
"This is my last race of the season, so I'm done now. I'm back in Australia next week."
Deng was born in a Kenyan refugee camp in 1998 after his mother fled the brutal civil war in Sudan.
The family arrived in Queensland in 2004, with Deng soon showing huge promise as an athlete.
He was controversially selected to run the two-lap race at the Gold Coast Commonwealth Games in April despite not qualifying for the final at the trials, but justified the selectors' faith by finishing seventh as countryman Luke Mathews claimed the bronze medal.
Since the Gold Coast Games, Deng and training partner Peter Bol — another Australian middle-distance runner of Sudanese descent — have been chasing the 800m national record in Europe, with Bol finishing ninth in 1:46.64 in Monaco overnight.
Deng's new mark means silver medallist Peter Norman's 200m record of 20.06 seconds — also set at the Mexico City Games — is now the oldest in the Australian book.
The most durable women's mark is Charlene Rendina's 800m time of 1:59.0 which dates back to 1976.
Deng also broke the Oceania 800m record of 1:44.3 set by New Zealander Peter Snell way back in 1962.
The race in Monaco was the fourth time in the past 47 days Deng had dipped under the 1:45 mark — more than any other Australian.
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