Also on day two of the Paris Games, Rafael Nadal shrugged off injury concerns to set up a second-round showdown at Roland Garros against great rival Novak Djokovic.
After US gymnastics superstar Biles wowed an A-list crowd at a packed Bercy Arena, focus turned to the swimming pool in the evening, with three golds on offer.
Leon Marchand surged to France's first Olympic swimming gold since 2012, obliterating the field to clock the second-fastest 400m individual medley time ever.
With the home crowd roaring on every stroke at La Defense Arena, the 22-year-old led off strongly and never looked back, touching in a new Olympic record time of 4mins 02.95secs, nearly six seconds clear of Japan's Tomoyuki Matsushita.
Torri Huske then beat American teammate and world record-holder Gretchen Walsh to clinch the women's 100m butterfly title, before the clash of the evening in the pool delivered an unexpected twist.
All the talk pre-race was about a blockbuster duel between Britain's reigning two-time champion Peaty and China's world title-holder Qin Haiyang in the men's 100m breaststroke.
They were neck and neck for large parts of a thrilling race, before Martinenghi roared through for victory, pipping Peaty and America's Nic Fink by just 0.02 secs as they shared second.
Qin, who was reportedly among 23 Chinese swimmers who failed drugs tests in the lead-up to the Tokyo Games, only to be cleared to compete, faded to seventh.
More silver for GB
Team GB added to yesterday's medal tally thanks to Kimberley Woods, who clinched a dramatic bronze medal in a heart-stopping women's kayak single (K1) final at the Vaires-Sur-Marne Nautical Stadium on Sunday.
The 28-year-old British paddler delivered a flawless performance, clocking a time of 98.94 seconds to secure her place on the podium.
The bronze was left hanging in the balance right to the end as reigning Olympic champion Ricarda Funk of Germany prepared to race, but in a dramatic turn of events, Funk incurred a 50-second penalty for missing a gate, handing the bronze medal to Woods.
Elsewhere, the men's and women's fours in rowing had successful semi-final heats, with both comfortably reaching their respective finals.
Matthew Richards and Duncan Scott (who qualified second fastest) both safely navigated their way into the men's 200m freestyle in the pool, while star-in-the-making Angharad Evans looked impressive as she qualified for the women's 100m breaststroke.
Then there was Andy Murray and Dan Evans' dramatic tie-break victory in the men's doubles, prolonging the career of the Scot and which followed a successful path to the next round earlier in the day in the singles for Evans.
The day wasn't without its tears though.
Swimming great Peaty was unable to emulate Michael Phelps in winning the same event three times, with the world record holder forced to settle for silver in the 100m breaststroke.
It also wasn't to be for Katie Boulter in the tennis women's singles as she lost in the first round 6-4 6-2 to Anna Karolina Schmiedlova of Slovakia.
It was also heartbreak for medal hopeful Rosie Eccles in the boxing as she lost a split decision despite her opponent suffering a point deduction in the final round.
There were also difficult days for Seonaid McIntosh, who missed out on qualification for the women's 10m air rifle final after her rifle malfunctioned, and judo gold medal hopeful Chelsie Giles, who suffered a shock loss in the opening round.
Monday sees favourite Max Whitlock aim for the podium in gymnastics, while Tom Daley will be in action in the diving.
Matt Richards and Tokyo silver medallist Duncan Scott will also be hoping for more success as they compete in the 200m freestyle final.
Biles wows A-listers
Tom Cruise and pop stars Lady Gaga and Ariana Grande were among a star-studded crowd watching Biles as the American began her quest for Olympic gymnastics redemption.
The four-time Olympic champion is competing in Paris three years after her campaign at the Tokyo Games unravelled due to a disorientating condition gymnasts call "twisties".
The 27-year-old 23-time world champion, widely regarded as the greatest gymnast in history, entered the arena to a standing ovation and a deafening roar greeted her introduction.
She acknowledged the support with a wave and she blew a kiss to the crowd after her image was flashed up on a giant scoreboard.
Biles opened her qualifying with a sublime performance on the beam, finishing second behind China's Zhou Yaqin.
She tweaked her left calf warming up for her second apparatus, the floor exercise, but still topped the standings.
She also led the vault but narrowly missed out on qualifying for the uneven bars finals.
Biles topped the all-around standings with 59.566 points, while the United States led the way in the team competition.
"It's incredible," said US team technical lead Chellsie Memmel. "What she was able to do looking like she has soreness or something in her leg is remarkable."
Nadal v Djokovic
Spain's Nadal beat 83rd-ranked Hungarian Marton Fucsovics 6-1, 4-6, 6-4 despite sporting strapping on his injured right thigh and will play top seed Djokovic on Monday.
His meeting with the Serbian 24-time major winner will be the 60th of their storied careers.
"Of course it's beautiful to play against one of the two biggest rivals that I had in my career, especially on this court," said the 38-year-old Nadal, who is at his farewell Olympics.
"But situations are completely different for him, for me. He's being very competitive. I was not being very competitive for the last two years, so in that case, I think probably he is the clear favourite."
On the basketball court, Kevin Durant returned from injury to produce a shooting masterclass as the United States launched the defence of their Olympic crown with a 110-84 win over Serbia.
Durant shot a near-perfect 8-of-9 from the field to finish with 23 points in a convincing win for the reigning champions.
In other sports, Japanese 14-year-old Coco Yoshizawa won women's street skateboard gold in an all-teenage final, seeing off the challenge of compatriot Liz Akama.
