Yeshaneh's record at the World Athletics Gold Label road race, eclipsed the previous record of 1:04:51 set by Kenyan Joyciline Jepkosgei in Valencia in 2017.
Marathon world record holder Brigid Kosgei finished second, and her time was also two seconds inside Jepkosgei's mark.
Both Yeshaneh and Kosgei were wearing a version of Nike's Vaporfly shoes, which have featured in several other track and road records in the last three years.
Some earlier models of the shoe were banned by World Athletics last month, but the latest one launched by Nike complies with the rules to limit carbon plate usage and sole thickness for elite races.
Yeshaneh's previous best time of 1:05:46 had stood as the Ethiopian record for five months between 2018 and 2019.