Chestnut devoured 83 all-beef hot dogs and buns in 10 minutes while Kobayashi ate 66 hot dogs and buns in the Netflix Labor Day event at the HyperX Arena in Las Vegas.
Three years ago, Chestnut downed a then-world record 76 hot dogs and buns in 10 minutes.
"It's amazing. I've been trying to hit 80 hot dogs for years and without Kobayashi I was never able to do it. He drives me," the 16-time Nathan's Hot Dog champion said after the event.
"We were not always nice to each other. ... We've pushed each other to be our best."
This was the first time the two nemeses have faced off in 15 years.
"I feel like I did everything I could," Kobayashi from Japan said via his interpreter.
With the victory, Chestnut earned $100,000 in prize money, a hot-dog shaped trophy and a World Wrestling Entertainment-designed championship title belt.
According to the Netflix streaming service, 2,400 hot dogs were cooked in the last month for the contest - 300 prepared for Monday's main event.
The 40-year-old Chestnut was banned from competing at this year's Nathan's Famous Fourth of July Hot Dog Eating Contest due to his sponsorship deal with rival plant-based food company Impossible Foods.
In 2007, Chestnut ate 66 hot dogs and buns, dethroning the six-time champion Kobayashi.
Kobayashi unsuccessfully tried to win the Mustard Belt back from Chestnut in 2008 and 2009, after which a contractual dispute meant that Kobayashi was no longer able to compete at Coney Island.
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