Even by recent standards of domestic domination this early season form by Pep Guardiola's team is impressive and it showed before a capacity crowd at its Allianz Arena.
Thomas Mueller bagged an early brace to put the reigning title holder in control before Pierre-Emerick Aubameyang gave Dortmund hope with a reply just before halftime.
After the break, Robert Lewandowski took the game away from the visitors with a double of his own, taking his remarkable tally to 12 goals in four games.
Mario Goetze scored the final goal to round off a stunning afternoon for the home side which looks unstoppable in its domestic league and is looking to regain the Champions League crown.
Guardiola sounded a note of caution after the victory. "The title isn't won today. We have to remain grounded," he told gathered reporters.
"We're delighted because we've beaten one of the best teams in Europe," he added.
Third-placed Schalke missed the chance to move above Dortmund into second place when beaten 3-0 at home earlier Sunday by Cologne.
Sanchez boosts Arsenal
In the English Premier League, Alexis Sanchez scored two superb goals in Arsenal's 3-0 win over fellow title challengers Manchester United at the Emirates.
United would have gone top with a victory, but instead was swept aside by the home side in a pulsating first half.
Chilean star Sanchez put Arsenal ahead in the sixth minute with an impudent back heel and just a minute later it was 2-0 as Theo Walcott set up Mesut Ozil for a sidefoot finish.
Louis van Gaal's visitors were in disarray and another flowing Arsenal move saw Sanchez rocket home the third in the 19th minute, his sixth in three games.
It was the final goal of the match, with Petr Cech making sure United was unable to gain a foothold with fine saves from Anthony Martial and Bastian Schweinsteiger.
Victory took Arsenal above Manchester United into second place on goal difference, trailing leader Manchester City by two points.
In the earlier Merseyside derby, Liverpool drew 1-1 at Everton in what proved to be its manager Brendan Rodgers' final game in charge
, the club announcing his sacking soon after the clash.
Danny Ings put Liverpool ahead but Roman Lukaku equalized just before the break after slack Liverpool defending. Sunday's other game in the EPL saw Tottenham Hotspur draw 2-2 at Swansea.
Honors even in Madrid derby
Cristiano Ronaldo failed to score for the fourth straight La Liga game as his Real Madrid team was held 1-1 by Atletico in the capital city derby.
A late equalizer from Luciano Vietto gave the home side a deserved share of the spoils and stretched its unbeaten run against Real to six games.
Karim Benzema's early header had given Real the lead and it was maintained after Keylor Navas kept out an Antoine Griezmann penalty.
Ronaldo was limited to few glimpses of goal as Real was forced back after the break and Costa Rican international Vietto scored from close range in the 83rd minute.
Navas had to make a brilliant late save from Jackson Martinez to keep the scores level with Real missing the chance to go top, instead occupying second spot, a point behind Villarreal.