The Texan, bidding for a record-equalling fifth Tour victory, was attacked and briefly dropped by German rival Jan Ullrich on the classic Tourmalet pass and then fell on the ascent to the finish, but still found the strength to win his first stage this year.
"After the crash, I had a big rush of adrenaline. I told myself 'Come on Lance, you must win the Tour today,'" said Armstrong, who increased his lead from 15 seconds to 1:07.
The defending champion had just counter-attacked behind Basque rider Iban Mayo when he appeared to get a spectator's bag snagged in his brake lever, bringing himself and Mayo crashing to the ground.
"I think it was a spectator's bag. But it was also my fault for riding too close to the right side of the road," he explained.
Moments after his fall Armstrong nearly came to grief again when his foot slipped out of a cleat, but from then on he took the stage by storm, surging clear of his rivals.
His break was so sudden and punishing that it seemed fuelled by the frustration of a Tour that had appeared to be slipping out of his control since he was humbled by Ullrich in Friday's time trial.
Long-term stage leader Sylvain Chavanel was eventually overhauled near the finish of the 159.5-km stage, Armstrong graciously patting the back of the exhausted Frenchman as he accelerated past.
The crash was his second in this year's Tour, having been involved in a massive pile-up on the first stage.With stomach problems before the prologue and suffocating heat, it has been far from a smooth ride for the U.S. Postal leader.
But his response on the approach to Luz-Ardiden, lined by thousands of fanatical Basque fans, was awesome.
Second at the start of the stage, 15 seconds behind Armstrong, Ullrich crucially lost 40 seconds on the final climb.
Ullrich, winner of the Tour in 1997, had looked strong when he first attacked Armstrong in the Tourmalet.
But the four-times Tour champion, at first dropped, managed to bridge the gap and join forces with the German and Euskaltel leaders Mayo and Haymar Zubeldia.
Ullrich's attack proved fatal to third-placed Alexander Vinokourov, who drifted back to a distant 2:26 behind the Texan at the finish, a total deficit of 2:47.
"This morning, I knew this was going to be a great day for me and for the Tour. I knew that if I wanted to win the Tour, I needed to attack today," Armstrong said.
"I could not wait for the last time trial," he said, referring to Saturday's 49-km timed test between Pornic and Nantes.
The time trial will be the final chance for Ullrich to strike back but he will have to repeat the form he showed in winning the first timed test at Cap Decouverte, something Armstrong is wary of.
"The Tour finishes on the Champs Elysees. Jan Ullrich is a great rider and everything is possible in the time trial.
"What matters most for me now is that I will be able to look at my team mates in the eyes tonight in the hotel," he added.