EF rider Carapaz dropped Simon Yates and soloed the final 10km to win his first ever Tour de France stage after finishing third overall in 2021.
The former Giro d'Italia champion, who won the Tokyo Olympics road race, also wore the overall leader's yellow jersey after his efforts in the second stage to Bologna.
"That was a big day for me," Carapaz said. "I suffered but I put a cross on an objective."
"How special it feels, I owe so much to my team," he said of the American Education First team who will be delighted with their two million euros a year new signing.
Overall leader Tadej Pogacar, defending champion Jonas Vingegaard and Remco Evenepoel kept their powder dry until a late series of attacks and counter-attacks put a shine on the medium mountain run.
The trio produced an entertaining scrap with third-placed Evenepoel finishing 12 seconds ahead of Pogacar, with Vingegaard losing two seconds to the leader.
The relentless Slovenian said his attack was off the cuff and "maybe stupid".
"I enjoyed it, I don't know what to say, I tested my legs and theirs. I thought I might be able to get away, so I had a go," said the 25-year-old Pogacar.
Pogacar had been the first to try his luck and Vingegaard was initially unable to follow.
Evenepoel however closed the gap while Denmark's Vingegaard then rallied to catch them both on a daredevil descent after picking up the wheel of a teammate who had been in the early attack.
"Well done to Visma for their tactics," Pogacar said.
Belgian Evenepoel then broke again, and finished strongly to consolidate his third place overall.
A group of over 30 riders broke away early on a balmy day in the south as they climbed to the ski resort of Superdevoluy.
Girmay stays in green
Nursing knee and elbow injuries, Biniam Girmay retained the green jersey for best sprinter with 387 points to Jasper Philipsen's 354.
"It's never easy a day after a fall, but I felt okay today," said the Eritrean who will race at the Paris 2024 Olympic Games.
Girmay spoke excitedly about the reaction back home where he said "from two in the afternoon until the end of the race everyone goes out onto the streets to watch the race or listen to it together".
Stage 18 on Thursday is billed as one of the prettiest, with lakes and mountains in Haute Provence and an opportunity for the one-day specialists during a 179km ride from Gap to Barcelonnette.
With the temperatures set to rise as the 2024 edition reaches a fascinating climax Pogacar admitted he had a history of wilting in the heat.
"Yes it's easy to see that all the times Jonas has dropped me, and maybe it's coincidence, it's been in the heat. So I've been working on heat and high altitude training," said Pogacar, cutting a happier figure than he has all Tour.
The final three stages are all potential game changers, with Friday's run taking the peloton to 2,800m altitude before a huge descent.
Saturday is also mountainous and features another downhill finale.
But the final stage could shake up the standings even more with a 34km individual time trial from Monaco to Nice potentially taking the title down to the wire on the French Riviera.
