Twenty-six-year-old Rosberg produced a stunning qualifying lap to clock a time that was more than half a second quicker than McLaren-Mercedes of Hamilton.
"It's a great feeling, fantastic," said Rosberg, who was so confident his posted lap time of one minute 35.121 seconds was unbeatable that he stepped out of his car with much of the final qualifying session still to run.
"It was strange beforehand because I was standing there on my own and everybody else was still going round, but I couldn't do anything any more, so it was strange. And then slowly but surely, I saw the sector times and I saw that it was definitely going to be enough so fantastic; very excited."
The result secured Rosberg's marque their first pole since Juan Manuel Fangio proved fastest at the 1955 Italian Grand Prix.
"For the whole team, it's a special moment," Rosberg said "It was a good lap and it all came together. It's the perfect start until now and I'm really happy for the whole team. It really shows that, as a team, we're moving forward."
Hamilton had finished on pole at the first two races this season - in Australia and Malaysia - but was content with second at the Shanghai International Circuit, where he has won twice - in 2008 and last year.
"Congratulation to Nico; fantastic," said Hamilton, sat next to the German with whom he has progressed alongside through the junior series.
"For me, is quite a cool feeling because we were teammates back in 2000 and good friends from way before that. We always dreamed of being here on the front row and racing in Formula One and here we are. Unfortunately, we won't be able to have that front row, but I'll just have to work my hardest to try to catch him up."
Schumacher, whose last career win - his 91st - came in Shanghai in 2006, said he was "very proud" of his Silver Arrows team, but acknowledged the result was not expected.
"I didn't think it would be enough to fight for pole position and looking at what Nico was able to do, obviously I think it's a little surprise for all of us," the seven-time world champion said.
In a quirk of fate, Sebastian Vettel, Red Bull Racing's German who drives with the No 1 on his car after winning 11 races on the way to a second successive world championship last season, will start in 11th position following his worst qualifying session in more than two years.
Not since the 2009 Brazilian Grand Prix has Vettel finished so far down the field on a Saturday. The 24 year-old, whose forefinger pointing skywards became a common sight in the sport last year as he claimed 15 pole positions, held his hands up and took responsibility. He had chosen a different exhaust set-up to his teammate, Mark Webber, who finished comfortably ahead.
"I don't want to blame the result on any packaging. Mark was faster, full stop," Vettel said, before making light of the situation. "I'm number 11. I have also two ones, two firsts, but it's one and one which makes 11."
Best yet for Kobayashi
Third place is Kamui Kobayashi’s best starting place for an F1 race since his debut in the series in 2009.
Chinese GP qualifying results
1 Rosberg, Mercedes 1m35.121s
2 Schumacher, Mercedes 1.35.626
3 Kobayashi, Sauber 1.35.784
4 Raikkonen, Lotus 1.35.898
5 Button, McLaren 1.36.191
6 Webber, Red Bull 1.36.290
*7 Hamilton, McLaren 1.35.626
8 Perez, Sauber 1.36.524
9 Alonso, Ferrari 1.36.622
10 Grosjean, Lotus no time
Top 10 cars had to qualify on tyres they will start the race on
11 Vettel, Red Bull 1.36.031
12 Massa, Ferrari 1.36.255
13 Maldonado, Williams 1.36.283
14 Senna, Williams 1.36.289
15 Di Resta, Force India 1.36.317
16 Hulkenberg, Force India 1.36.745
17 Ricciardo, Toro Rosso 1.36.956
18 Vergne, Toro Rosso 1.37.714
19 Kovalainen, Caterham 1.38.463
20 Petrov, Caterham 1.38.677
21 Glock, Marussia 1.39.282
22 Pic, Marussia 1.39.717
23 De la Rosa, Hispania 1.40.411
24 Karthikeyan, Hispania 1.41.000
*Hamilton given a five-place grid penalty for a gearbox change
Follow us @SprtNationalUAE