New Zealand's Julian Dean, riding for Garmin-Cervelo, was seventh.
It was the first Tour stage victory for Farrar, one of the world's best sprinters, and showcased the dominance of the Garmin-Cervelo team over the past two days at cycling's greatest race.
The 198km flat route from Olonne-sur-Mer to Redon in western Brittany favoured sprinters like Farrar, Mark Cavendish of Britain, Italy's Alessandro Petacchi, Tom Boonen of Belgium, and Hushovd, the world champion.
"I certainly would have taken it on any day," Farrar said of the stage victory. "But as an American, winning on the Fourth of July, it's the icing on the cake. ... Lucky me."
After he crossed the finish line, Farrar held up his hands to form a "W'' with his fingers and thumbs to honour his friend and training partner Wouter Weylandt, who died in a crash during the Giro d'Italia in May.
Farrar had pulled out of the Giro after Weylandt, a 26-year-old Belgian, clipped a wall in a sharp descent, fell off his bike and slammed his head on the ground in the third stage of the race, dying almost instantly.
"This has been a horrible last two months with everything that happened in the Giro," Farrar said. "I've had a lot of ups and downs. But in the end, I wanted to be able to come back, and do something special to pay tribute - and this is certainly the biggest stage in the world to do that."
"It's a little bit unbelievable to me at the moment that it actually happened," he added.
In Monday's finale, Cavendish's HTC-Highroad team had lined up to escort the British speedster to the finish from near the 4km mark, but by the last few hundred metres Hushovd and Farrar had zoomed ahead.
"To have the world champion and yellow jersey work for you to launch the sprint, it's crazy," Farrar said of Hushovd.
At the finish, the American nosed ahead of France's Romain Feillu, who was second, and Jose Joaquin Rojas of Spain in third. Farrar and a pack of riders, including Dean, clocked the same time: 4hr 40min 21sec.
With his victory, Farrar became the first American to win a Tour stage since Levi Leipheimer placed first in the individual time trial in Angouleme in 2007.
The top standings didn't change: Hushovd retains a split-second edge over Garmin-Cervelo teammate David Millar of Britain, while Cadel Evans of Australia of BMC is third, 1 second back.
Defending champion Alberto Contador of Spain, who lost time on Saturday after getting entangled in a crash, is 69th overall - 1:42 back of the Norwegian leader.
Among other hopefuls for victory on the Champs-Elysees on July 24, 2010 runner-up Andy Schleck of Luxembourg, the leader of Leopard-Trek, is eighth overall, 4 seconds behind Hushovd.
Five breakaway riders jumped out early in the stage from the coastal town of Olonne-sur-Mer, building a lead of as much as 8min 5sec by the 74km mark. The fast-moving pack reeled them all in with just 9km to go.
Riders scaled and crossed the 3.3km Pont de Saint Nazaire, a wind-swept suspension bridge over the Loire River whose blustery conditions temporarily broke up the pack.
Another of the day's big challenges was an intermediate sprint at Saint-Hilaire-de-Chaleons, about halfway through the stage.
There, Cavendish suffered a blow in his hopes of winning the Tour's green jersey - awarded to the best sprinter - after Hushovd cut ahead of him and he responded by burrowing his head into the Norwegian's back.
Race officials penalised both men by docking them to the last places in the pack for the intermediate sprint, costing them crucial points needed for the green jersey quest. Cavendish says winning it is a goal this year. Hushovd has won that jersey twice, and says he's not aiming for it this year.
Hushovd, the Norwegian world champion, took the yellow jersey after Garmin-Cervelo won the team time trial Sunday. A sprint specialist, he's not expected to hold the lead through the mountains in Weeks Two and Three.
With such a narrow lead, Hushovd could even come under pressure to hold the coveted leader's jersey on Tuesday, when the pack travels 172.5km from Lorient to Mur de Bretagne with a super-steep - if only 2km - uphill finish.
