The 19-year-old won Uganda's first ever medal in his debut at the event, clocking a championship record of 58:49.
It was Kiplimo's second major championship medal after taking the 2017 World Junior Cross Country title on home soil in Kampala.
"It was an amazing race and the course was good," Kiplimo said after the race. "I am happy I have run my personal best and Championship record."
Kiplimo's win came after Kenya's Peres Jepchirchir took a dramatic victory in the women's race, breaking her own women-only world record in the process.
The men’s race started off at a very pedestrian pace and had a packed lead group of just over 20 runners reaching 10km in 23:21.
The focus was still very much on the triple world record holder Cheptegei, chasing his fourth win from four races this season.
But it was another pre-race favourite, Kandie, who made the first move pulling away from the group with the younger Ugandan hot on his heels.
Cheptegei, the 5,000m and 10,000m world record holder, was then seemingly unable to match their pace.
The two went head-to-head as they did in January at a hard-fought race at the San Silvestre de Sao Paulo in Brazil.
Then Kandie pipped Kiplimo right on the line as the youngster celebrated too early.
But Kiplimo, the youngest competitor in the 5000m at Rio 2016, took no chances on Saturday.
He made sure he had a comfortable lead as he chased history for the landlocked East African nation.
And the speed he has shown on the track already this season proved decisive as he held on for his second career win at the half-marathon distance.
“It is hard to explain, because I am full of emotion. Unbelievable." - Jacob Kiplimo
“I feel very happy. I feel great, it was my first time at the World Half Marathon Championships and I won!" said Kiplimo who won his first half-marathon last year in Kampala.
Like his training partner Cheptegei, Kiplimo has had a stellar season running a world lead of 7:26.64 in the 3000m at the Rome Diamond League, and winning the 5000m in Ostrava in 12:48.63 in September.
Chepetegei just missed out on the medals, finishing fourth with a time of 59:21 just 10 days after breaking the 10,000m world record in Valencia.
The reigning world cross-country and 10,000m champion said, "My body was really going very well but I discovered I still had some fatigue in the legs. I couldn’t give more than that.
"I have been training more for 5000m and 10,000m so I was not well prepared for it, but I’m very happy – running a sub-60 is really special for me." - Joshua Cheptegei