Busch, the last driver to qualify in the 46-car field, posted a lap at 126.421 mph for his eighth career Sprint Cup Series pole but his first since June 2010 at Pocono (44 races ago).
"It's cool to come out here and get the pole," said Busch, who won the 2008 race at Watkins Glen. "[Teammate] Joey [Logano] got it in Sonoma [Infineon Raceway], and I got it here, so Joe Gibbs Racing swept the pole at the road courses this year. Hopefully, we can win here on Sunday."
Jeff Gordon held the previous track record at Watkins Glen, set in 2003.
Allmendinger, who was the third-to-last driver to make his attempt, qualified 0.21 seconds behind Busch to claim the outside pole.
"It's Kyle Busch; he's pretty good at this," Allmendinger said. "I think when he gets older, he might be pretty good at this sport."
"We got a great chance to win this race," Ambrose said. "I'm really happy with our race setup. We'll keep our fingers crossed and hope things go our way."
Brad Keselowski, who continues to heal from a fractured left ankle, qualified 12th. Keselowski endured pain and fatigue to pick up the win last Sunday at Pocono.
Hamlin did not complete his qualifying run after he slid off course and made contact with the barrier. He sustained slight damage to his right-rear panel. Hamlin's team expects to repair his primary car and not rely on a backup car.
"I was aggressive, and I got a little loose," Hamlin said. "It barely touched the wall and the wheel wasn't really that much damaged."
The 90-lap race at Watkins Glen is scheduled to start just after 1:00 p.m. (et).