The Malaysian swimmer, who did not make it to the final four years ago in Incheon, South Korea, finished with a time of 1:47.99, setting a faster time than he did in his heat run.
China's Sun Yang was the winner with a time of 1:45.43 as he finally won his first Asian Games gold medal in this event at the third time asking, having finished second in 2010 and 2014.
It was also his sixth overall gold at the Asian Games.
Japan's Katsuhiro Matsumoto (1:46.50) finished second, and Ji Xinjie (1:46.68) came third to join compatriot Sun on the podium.
Perenang negara, Welson Sim meraih kedudukan ke 6 dalam aksi final saingan 200m gaya bebas di Pusat Akuatik. #TeamMAS ?? #AsianGames2018 pic.twitter.com/8xpCKrnPS2
— #TeamMAS ??? (@myTeamMAS) August 19, 2018
FINAL STANDINGS
1. Sun Yang (China) - 1:45.432. Katsuhiro Matsumoto (Japan) - 1:46.50
3. Ji Xinjie (China) - 1:46.68
4. Khader Baqlah (Jordan) - 1:46.77
5. Naito Ehara (Japan) - 1:47.66
6. Welson Sim (Malaysia) - 1:47.99
7. Lee Ho-joon (South Korea) - 1:48.10
8. Hoang Quy Phuoc (Vietnam) - 1:50.57