Dutchman Jochem Uytdehaage, who edged out Parra in last week's 5,000m, took silver while defending champion Adne Sondral of Norway claimed bronze.
Parra, cheered on by his home crowd, recorded a time of one minute 43.95 seconds.
"I need a job to survive"
Uytdehaage looked like a good bet for his second gold of the Games when he broke the old record an hour earlier, with a time of 1:44.57 - but it proved to be not fast enough.
Sondral took third spot with a time of 1:45.26.
"It's an incredible feeling, just incredible," he said.
"The crowd empowered me." "I had a great first two laps and a good second two laps. It's a great feeling."
Parra, who works in a home-furnishing store to spupplement his income, added that his rode to success has not been easy.
"There aren't too many skaters that work and skate at the same time," said Parra.
"In Holland and Europe, most teams are fully sponsored. My parents aren't taking care of me. Maybe my wife does, sometimes. But I need a job to survive."
It was the fifth world record set at the Olympics in seven speed skating events so far.