The pint-sized climber danced up the third and final climb of the 171km stage from Belluno to cross the finish line 17 seconds ahead of Duarte and secure the third stage win of the race for Colombia.
On a day that the Colombian sports minister Andres Botero visited the Giro d'Italia there was yet more reason to celebrate for the South American nation as Nairo Quintana of Movistar retained his commanding 1:41 lead over Rigoberto Uran (Omega Pharma-Quick Step) with three stages of the race remaining.
After a measured final climb Quintana finished the stage in tenth place, 2:46 down on Arredondo. The only rider of the main GC favourites to finish above last year's Tour de France runner-up was Italy's Fabio Aru, the stage 15 winner, who attacked in the closing kilometre to take three seconds back on the race leader - and pile on the pressure in the battle for podium places.
The big loser of the day was Australian veteran Cadel Evans (BMC), who plummeted from third place to ninth on GC after riding home over a minute and a half down on the maglia rosa.
Pierre Rolland, the explosive French climber from Team Europcar, rode into the third position on the podium after another brilliant performance in the mountains. Rolland now trails Quintana by 3:29 with Aru rising to fourth place just two seconds back - and tied for time with Poland's Rafal Majka (Tinkoff-Saxo).
But the day belonged to 25-year-old Arredondo, who snared his maiden Grand Tour stage win in his first year as a European professional - and in doing so secured the blue king of the mountains jersey.
Having been part of a 14-man breakaway that reached the foot of the final climb with a five-minute cushion over the peloton, Arredondo joined a select chasing group after the Belgian Thomas De Gendt (Omega Pharma-Quick Step) attacked from the break early on the ascent, before riding clear with 4km remaining.
Duarte, the lively 27-year-old climber, was distanced on numerous occasions by Sky pair Philip Deignan and Dario Cataldo, but recovered to lead the chase on his compatriot.
Entering the final straight, Arredondo was slaloming across the road as the finish line drew nearer and his dream became more of a reality with every pained pedal stroke.
Arredondo crossed the line with a punch of the air 17 seconds ahead of Duarte, who stoically zipped up his open shirt and no doubt rued yet another missed opportunity: it was the second time this year - and the fourth time in his career - that Duarte has finished second on a stage in the Giro in a run that dates back to 2011.
Arredondo's victory followed wins for both Quintana and Uran earlier in the race - and marked the first time in a Grand Tour that three different Colombians have won a stage since the 1990 Vuelta a Espana.
Ireland's Deignan took a worthy third place a further 20 seconds back to underline once again that he's back from the injuries that have plagued him since 2011. It was the first time in a quarter of a century that an Irishman has finished in the top three of a stage on the Giro - a cause for celebration in the year the race started in Ireland.
The remnants of the break - Franco Pellizotti (Androni), Edoardo Zardini (Bardiani-CSF), De Gendt, Ivan Basso (Cannondale) and Cataldo - crossed the line in dribs and drabs before Aru led the main favourites home.
Evans, who wore the maglia rosa before being deposed by Uran on last week's individual time trial to Barolo, crossed the line 4:24 down, his face a picture of pain.
Last year's third place rider's position in the top ten is now under threat, the 2011 Tour champion in ninth at 4:59 ahead of two brutal days in the Dolomites.
FOURTEEN-MAN GROUP: An active start to the race saw numerous small groups form on the first climb of the day, the Cat.1 Passo San Pellegrino before coming together on the descent.
The eventual days break featured four former stage winners on the Giro - Franco Pellizotti (Androni), Thomas de Gendt (Omega Pharma-Quick Step), Matteo Rabottini (Neri Sottoli) and Ivan Basso (Cannondale) - as well as Julian Arredondo (Trek Factory Racing), Dario Cataldo and Philip Deignan (both Sky), Edoardo Zardini (Bardiani CSF), Emanuele Sella (Androni), Tim Wellens (Lotto-Belisol), Ivan Rovny (Tinkoff-Saxo), Martin Keijzer (Belkin), Fabio Duarte (Colombia) and Alberto Losada (Katusha).
Arredondo took maximum points over the San Pellegrino pass and the "new" Cat.2 Passo Del Redebus as the escapees built up a maximum lead of 7:45 over the peloton. De Gendt made the first move at the foot of the final Cat.1 climb to the Rifugio Panarotta, his attack sparking a frenzy behind.
Two-time Giro champion Basso led the chase before fading, with Colombian pair Arredondo and Duarte forming an alliance with Sky duo Deignan and Cataldo until Arredondo rode off towards his historic victory.
BIG WINNERS OF THE DAY: It's fair to say Colombia had a pretty stellar day collectively, Arredondo in particular with his stage win and the blue jersey secured. But special mention must go to Pierre Rolland (Europcar), the only GC rider besides Fabio Aru (Astana) to attack on the final climb. The Frenchman's fast tempo saw many of his rivals lose time and Rolland now occupies the third rung on the podium.
BIG LOSER OF THE DAY: If Wilco Kelderman (Belkin) struggled on the final part of the last climb his faltering was nothing compared to that of Cadel Evans, who is now the best part of five minutes adrift of Quintana and could drop even further on the Zoncolan.
KEY MOMENT: Rolland's attack with just over 2km remaining was what exploded the pack of main favourites - although Colombian viewers would say it was small fry compared to Arredondo's decisive surge 4km from the summit.
TALKING POINT: Is that the end of Cadel Evans's Grand Tour career? There's talk of a pop at the Vuelta later this season, but would BMC be better served bringing on some younger talent?
COMING UP: Before the final showdown on Monte Zoncolan there's the small matter of the 26km mountain time trial on the Cima Grappa. With ramps as high as 14% and an uphill slog for the final 19km, it's going to be quite the spectacle. If you thought today's time gaps were big - then wait until you see the results on Friday.
- Sports & Recreation
- Nairo Quintana
- Cadel Evans
- Rigoberto Uran
- Dario Cataldo
- Fabio Duarte
- Pierre Rolland
- Philip Deignan