Ashley came from one point off the pace to finish third in the boardsailing medal race on sun-drenched Fushan Bay.
He held off Frenchman Julien Bontemps by a solitary point, with a further five points to fast-finishing Israeli Shahar Zubari.
In light eight-knot winds, which were hardly ideal for the lanky 24-year-old Aucklander, he crossed the line just 12 seconds clear of Bontemps to emulate Barbara Kendall's gold in Barcelona in 1992.
"It's incredible, I don't know what to say. There was a lot of pumping going down, there was no time to breathe throughout the whole race and I was just destroyed at the end," said Ashley, who made it a big-event double after his world title in January.
"Thankfully the guys behind me weren't able to catch me, I thought they were going to at one stage so yeah, I'm just stoked."
It was New Zealand's seventh Olympic yachting gold overall, and third on a boardsail including Kendall's medal and the bronze her brother Bruce won in 1984.
As Ashley realised he'd won there was little outward jubilation, just a smile after he crossed the line following the quickfire medal race that lasted just 19 minutes.
"I just thought 'I've done it', it was more relief than anything," he said..
"I've been working towards this for a long time and supported by a whole lot of people. It's just amazing to have done it for myself and my family."
Ashley, wrapped in a black Kiwi flag, was greeted by his jubilant New Zealand teammates at the boat ramp along with coach Grant Beck and team chef de mission Dave Currie.
He went into a thrilling medal race - which counted for double points - tied for second with Briton Nick Dempsey, a point off the lead held by Bontemps, and eight ahead of fourth-placed Zubari.
Ashley made a swift start on the right-hand side of the course, then tacked back towards his two main rivals to be second at the first mark behind Hong Kong.
Then he got a handy break when Bontemps tumbled into the water at the second mark, as Ashley went through third and held his position to the finish.
Beck said it was a massive tactical race for his charge.
"Tom was leading the French guy one way and covering the Englishman at the same time. I must say it's one of the best races I've ever seen Tom sail. It's pretty neat he did it in the medal race, the one that really counted," Beck said.
"When it really is tough, Tom often will come through. Mentally and physically, he's got huge endurance and he's a very bright boy, computing a lot of stuff in his head as he's going along."
Ashley looked to have the gold at his mercy when he opened up a seven-point lead after eight races, but he had his two worst finishes leading into the medal race.
He made his first blunder of the regatta at the start of yesterday's 10th race, letting his rivals get away on the other side of the course and finishing 32nd which he discarded as his worst score.
The gold was a welcome tonic for the New Zealand sailing team who went medal-less in Athens four years ago for the first time since 1976.
