Unflustered and swimming well within himself, the American coasted through his morning heat in one minute, 55.53 seconds, more than four seconds outside his own world record, but enough to qualify fifth overall.
"I'm very happy with that swim," Phelps said. "That's all I needed it to be."
Austria's Dinko Jukic was the fastest overall, stopping the clock at 1:54.79, just ahead of Phelps' compatriot Tyler Clary.
"It felt fantastic. The time was faster than it was at (US) trials," Clary said. "Coming into the third wall I was amazed at how well I felt. Historically I go faster in the evenings, and I felt like there was more there."
The 200 butterfly is one of the most physically demanding events in swimming and Phelps is a master of managing himself through the heats and semi-finals without over exerting himself.
Compared to Beijing where he won eight gold medals, Phelps has not had a great start to the London Games, finishing fourth in the 400 individual medley then second in the 4x100 freestyle relay.
But his best events are yet to come and he is poised for a memorable night on Tuesday.
If he wins the 200 butterfly final, his favourite race, he will become the first male swimmer to win gold in the same individual event at three successive Olympics.
He will also equal Soviet gymnast Larisa Latynina's record tally of 18 Olympic medals.
Phelps could then claim the outright record when he contests the 4x200 freestyle relay event, where the Americans are overwhelming favourites to win.
Federica Pellegrini rebounded from the disappointment of missing a medal in the women's 400 metres freestyle final by setting the fastest qualifying time in the 200 freestyle heats.
The Italian finished a disappointing fifth in the 400m final on Sunday after going into the event as the reigning world champion and world record holder but made a better start to her defence of the 200 gold medal she won in Beijing four years ago.
Racing in the lane next to American teenager Missy Franklin, Pellegrini won her morning heat in one minute and 57.16 seconds, the fastest time overall.
Allison Schmitt, who won the silver medal in the 400, was second best in 1:57.33 with Franklin next at 1:57.62.
"It felt awesome. I definitely didn't expect to be that fast this morning," Franklin said.
"It is a very stacked event, no matter what happens it will be a great semi-final and final."
Camille Muffat of France, who won the 400 gold medal, was 12th overall. The top 16 swimmers qualified for the semi-finals later on Monday, with the fastest eight from the semi-finals advancing to Tuesday's final.
"I couldn't sleep (last night)," said Muffat. "I would open the drawer, take out my medal and say 'oh yeah, it's true, I won'.
"One is what I wanted, two, I never thought possible. A medal of any colour would be something."
Chinese sensation Ye Shiwen set herself up for a golden double when she posted the fastest qualifying time in the women's 200m individual medley then dismissed suggestions of foul play.
The 16-year-old shattered the world record to win the 400 medley on Saturday, but her eye-popping performance, when she swam her final lap almost as fast as Ryan Lochte did in the men's race, aroused suspicions.
"There's absolutely no problem with the doping,' she told reporters, speaking through a translator. "The Chinese team has always had a firm policy about anti-doping."
Despite easing off on the final freestyle leg, Ye still finished well clear of her main rivals to emerge as the nearly unsinkable favourite to snatch the gold.
She was more than a second and a half ahead of her nearest rival, Zimbabwe's Kirsty Coventry, and more than three seconds clear of Australia's Stephanie Rice, the Beijing Olympic champion and Ariana Kukors, the current world record holder.