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Fridman, 28, won the men's Mistral title after finishing second in the final race.
Israel first entered the Games in 1952 in Helsinki and it had to wait 40 years for its first medal, on the judo mat in Barcelona.
"For us this is a dream come true, something we have been dreaming about since our first Olympics in 1952," said Israeli team manager Gilad Lustig in a statement to Reuters.
"Gal Fridman is our greatest athlete. To see our flag displayed and hear our national anthem played at the awards ceremony is a moment we have long been waiting for."
Fridman, who won a bronze in 1996, was not selected for the Sydney Games and gave up the sport for two years before returning to win the world title in 2002.
Greek Nikos Kaklamanakis, the host nation's symbol of hope for the Games after lighting the 2004
Overnight leader Ricardo Santos from Brazil trailed in 17th to finish out of the medals.
An Israeli embassy spokesman's reaction to the victory was a simple "wow".
Often snubbed by its Arab neighbors, Israel suffered tragedy in 1972 at the Munich Games when 11 of its athletes and coaches were killed during a hostage-taking by Palestinian guerrillas.
