SpaceShipOne on Monday reached an altitude of 114 km (368,000 feet) according to preliminary radar readings, organisers said, breaking the record for sub-orbital flight set by the X-15 rocket plane more than 40 years ago.
"We blew the X-15 away," said Peter Diamandis, president of the Ansari X Prize Foundation, which offered the prize for the first private spacecraft to carry out sub-orbital flight twice within two weeks.
The X-15 rocket plane, jointly developed by NASA and the US military, set an altitude record of 108 km (354,200 feet) on 22 August 1963.
As SpaceShipOne touched down at Mojave in California on Monday, its designer - aviation pioneer Burt Rutan - stood alongside British tycoon Richard Branson and Diamandis on the tarmac of Mojave airport leaping for joy and cheering the historic feat.
SpaceShipOne reached a height
of 114 km, a record
Branson last week announced plans to join the private space race using a space vessel based on SpaceShipOne.
SpaceShipOne was successfully tested in Mojave on 21 June and reached an altitude of 103 km on Wednesday in the first leg of its X Prize bid.
The stubby-winged rocketship was piloted on Monday by former US navy test pilot Brian Binnie, 51, who earned his wings as a commercial astronaut.
On Wednesday, the craft rolled dozens of times at speeds of around 2,700 km per hour, corkscrewing through the sky.
But there were no such problems on Monday and pilot Binnie managed to ignite the rocket engine for a total of 84 seconds, five seconds more than on Monday.
SpaceShipOne is expected to
spawn commercial space travel
US Federal Aviation Administration, Marion Blakey, who is responsible for regulating the spaceship said, "It's a historic thing, the beginning of personal transportation into space," she said.
SpaceShipOne was designed and built by aviation pioneer Rutan, who joined forces with Microsoft billionaire Paul Allen to launch the personal space "revolution" from a dusty airfield in the Mojave Desert.
Rutan selected the 4 October date to coincide with the 47th anniversary of the 1957 launch of the Soviet Union's first satellite, Sputnik I, which sparked the original space race between Moscow and Washington.
Organisers who proposed the competition hope it will spawn an age of space travel rivalling the dawn of commercial air transport in the late 1920s.
"What we finally have here, after 40 years of waiting, is the beginning of the personal space flight revolution"
president, Ansari X Prize Foundation
"What we finally have here, after 40 years of waiting, is the beginning of the personal space flight revolution," said Diamandis.
The X Prize, funded by private donors, was established in 1996 and modelled on the 25,000-dollar Orteig prize that aviator Charles Lindbergh won when he became the first solo pilot to cross the Atlantic in 1927.
His feat gave birth to airlines and allowed ordinary people to fly.
To win the X Prize, the same reusable manned spacecraft needed to make two journeys into space within two weeks while carrying the equivalent weight of two passengers.