Phelps set a personal best in the 200-yard individual medley at 1:41.32. The race was his first competition since he broke a bone in his right wrist in October. He said his surgically repaired wrist felt fine.
"Having gone what I've gone through the past few weeks, it's all I can ask for," said Phelps, of Rodgers Forge. "I knew Lochte was going to break the record; I thought he was going to break 1:40. He's swimming real well right now."
Lochte lowered his own mark in the event, winning in 1:40.08, which was 0.47 of a second better than his time from 2006.
"I love any chance I can [to race Phelps]," Lochte said. "Hopefully, I'll carry that momentum through the rest of the meet.
Phelps usually has Lochte's number in a 50-meter Olympic pool. He beat him in the 200 and 400 IMs at this year's world championships in Australia.
But this week's races are in the 25-meter indoor pool at Georgia Tech, site of the 1996 Olympic swimming competition. It's half the size of the pool that will be used in the Beijing Games next year.
Lochte was a double winner in the first short-course nationals held since 1991. The meet is a mix of Olympians, college and high school swimmers.
He defeated a strong field in the 50 freestyle, winning in 19.31 seconds. Jason Lezak, the oldest man in the final at 32, was second.
Phelps returned at the end of the evening as leadoff swimmer in the 400 medley relay. He had Club Wolverine in second after his backstroke leg, and that's where teammates Peter Vanderkaay, Davis Tarwater and Chris DeJong stayed.
Natalie Coughlin won the women's 50 free in 21.46 seconds, bettering the American record of 21.63, set in 2006 by Kara Lynn Joyce, who finished second in 21.81.
The U.S. team for next year's world short-course championships in Manchester, England, will be chosen based on this week's results. But some of the top Americans who qualify probably won't go because the April competition conflicts with their Olympic training schedules.