Kate Hawood (Loughborough University) went into this morning's final as the fastest qualifier and looked confident as she took to the blocks.
The new British record holder carved out an early lead and touched first after 50m, her turn was just inside the British record time, but entering the final 50m City of Edinburgh swimmer Kirsty Balfour began pushing Haywood all the way.
Balfour swam an impressive final 25m as she began closing the gap on the leader, but Haywood's power was too much for Balfour as Haywood touched home in 1:07.84 to take the gold medal.
"I'm so happy," Haywood said. "I was really pleased with my swim last night and today I tried not to think about swimming quickly but just concentrating on where I was in the race.
"I went out fast in the first 50m and held for the final 50m and am just so pleased to have done it."
Balfour had to settle for silver after finishing in 1:08.05. Bronze was taken by Georgia Holdreness in 1:08.76.
The women's 50m Freestyle saw Fran Halsall (City of Liverpool) achieve her second nomination for this year's Team GB after powering to victory in this morning's final.
She looked in charged of the race throughout and gave herself a good lead over the first 25m, she showed her sprint ability as she touched home in 24.79 to take the gold medal.
"I'm really happy with that and I really enjoyed that race," she said. "It's great to have qualified and am really looking forward to going to Beijing.
"I'm going to go and get some rest and prepare for the 100m Butterfly tonight but I am feeling relaxed.
"I've got six events in my programme at this event so I'm looking forward to the rest of the week."
Katy Sexton (Portsmouth) finished in second place to take silver with 25.51, while bronze went to Emma Wilkins (Plymouth Leander) in 25.90.
The women's 200m Individual Medley final saw 19-year-old Hannah Miley achieve her dream of meeting the selection criteria to be considered for nomination to the British Olympic squad.
It was Stockport Metro's Keri-Anne Payne that started the strongest and built herself a good lead over the three other athletes that had achieved the FINA 'A' qualifying time. Payne looked strong across first 100m, but on the Breaststroke lap Miley began pulling back.
Garioch's Miley touched first at the 150m mark and looked impressive across the final 50m to secure her gold medal in a time of 2:12.17.
Payne got the silver medal after touching in a time of 2:12.43, City of Birmingham's Terri Dunning won the bronze medal in 2:14.35.