Jones, bronze medallist in Monday's 100 breaststroke, took the race out at a blistering pace and was 0.72 seconds under world record pace at the halfway mark.
Beard clawed the lead back and swooped through on the final touch to become the first American winner of the event since Sharon Wichman in 1968.
Beard won in an Olympic record two minutes 23.37 seconds, nearly a second outside the 2:22.44 world mark she set at the U.S. trials in July when she deprived Jones of the record.
Jones, 100 breaststroke silver medallist at the 2000 Sydney Games and 200 silver medallist behind Beard at the 2003 world championships, had to settle for another silver in 2:23.60 while Germany's Anne Poleska took the bronze in 2:25.82.
Beard won an Olympic medley relay gold and was silver medallist in the 100 and 200 breaststroke at the Atlanta Games when she was only 14.
She took the 200 breaststroke bronze in Sydney and scooped another silver in the 200 individual medley on Tuesday.
Defending Olympic champion Agnes Kovacs of Hungary, fourth in Tuesday's 200 individual medley final, could manage only fifth, one place ahead of China's former world record holder Qi Hui, who was disqualified in Monday's 100 breaststroke final.
More from rediff