Bolt now holds both the world record and the Olympic record in this race.
The Jamaican superstar won the race, clocking in a season's best 19.78s, while Grasse took the second automatic qualification spot, running a new Canadian national record of 19.80s.
He said before the Games: "I believe in myself fully that I can go to Rio and hopefully get a medal".
There was drama in the final few metres of the third semi-final, as Justin Gatlin of the United States and Yohan Blake of Jamaica were pipped to the finish line by Alonso Edward of Panama and Churandy Martina of the Netherlands, with times of 20.07s and 20.10s respectively.
The American challenge will now fall to Lashawn Merritt, the 400 specialist who clocked 19.94 to win his heat ahead of France's Christophe Lemaitre.
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Usain Bolt crossed in 19.78 with Andre De Grasse clocking 19.80 despite both smiling at each other in the closing stages. If I can run a little more efficiently on the turns.
Gatlin, who said he had been hampered by an ankle injury, finished in 20.13, enabling Briton Adam Gemili and Turkey's Ramil Gulyev to edge him out of the fastest loser slots. "Hopefully I'll get a top lane tomorrow", he said, adding his preference would be lane six or seven where the bend is not perceived to be too sharp.
"I need to run efficiently and get into the straight and run the ideal race".
Usain Bolt eased over the finish line in 20.28 seconds.
The men's decathlon medals will be awarded tonight after the 1,500 meters.
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Bolt ran in Heat 9 of the 200m and went to win it with easily with bringing down his pace in the last 30 metres.
Bolt is bidding for another treble of medals after winning the 100m, 200m and 4x100m relay medals at the last two Olympics. After claiming 100m gold on Sunday, the Jamaican is seeking to complete a remarkable and unprecedented sprint double in three successive Olympics.
Viewers loved the idea of the seemingly budding bromance, and Bolt even jokingly told NBC and BBC that "De Grasse was supposed to slow down at the end", it seems that's not how he REALLY felt! He had earlier finished second in the men's 100m final behind Bolt.
"I feel I have a great shot to get on the podium again", De Grasse said.
The 200m is his favourite event, but behind him it could be a close run thing.
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Behind the clear favourite, it could be anyone's silver and bronze medal, especially with no Gatlin and Blake.