Overeem landed a crippling body kick, then finished Brock Lesnar with punches just 2:26 in the first round of the main event of UFC 141 on Friday.
Overeem will now get a shot at Junior Dos Santos' heavyweight title, while Lesnar called an abrupt end to his MMA career.
"Brock Lesnar is officially retired," the 34-year-old Lesnar told the crowd of a little more than 12,000 immediately after the fight. "I promised my wife and my kids if I won this fight, I would get a title shot, and that would be my last fight. But if I lost tonight ... you've been great."
After taking a punch that opened a cut over his left eye in the opening moments, Overeem quickly controlled the fight with a series of knees. About 45 seconds before the finishing sequence, the Dutch kickboxer had Lesnar in trouble with a combination of knees in punches against the cage.
Lesnar (5-3), the former WWE star who had 12 inches of his colon removed this past May, recovered — but only temporarily.
The 31-year-old Overeem (36-11) connected again, this time with a left kick right at Lesnar's liver that sent the UFC superstar wobbling and grimacing into the fence. Overeem finished the night and Lesnar's career with a dozen right hands.
"Today was all about bad intentions. First or second round, I promised," said Overeem, who said he had told his fiancee on Thursday night exactly how the fight would play out.
"Junior Dos Santos is next. I promise you guys that."
UFC president Dana White said there was no indication earlier in the week that Lesnar would walk away, but he admitted he wasn't shocked.
"I had no idea he was going do that," White said. "Am I surprised? No. Brock Lesnar has made a lot of money in his career and achieved a lot of things."
Overeem said he was sad to see the UFC’s biggest pay-per-view star walk away.
"I think he shouldn't walk away. Love him or hate him, there's always something with Brock fighting," Overeem said. "I think he has achieved a lot in a short span. It would be a shame if he stopped now. I think there’s more to gain."
Nate Diaz beat Donald (Cowboy) Cerrone in a co-main event lived up to all its pre-fight trash talk as the fighters battled all the way to the bell, exchanging punches to the very end as the fans stood on their feet.
Diaz's superior punching was the difference in a unanimous decision victory (30-27, 30-27, 29-28).
"I got poked in the eye early. I'm glad I got the win," said Diaz, who after improved to 10-5 in the UFC. He shook hands with Cerrone and tapped the same cowboy hat he had knocked off earlier in the week at the press conference.
Before the fight it was Cerrone who started the antics by making a rude gesture toward Diaz.
Diaz came out and firing several stiff right and left hands and a dizzying array of jab combos that bloodied his opponent.
Cerrone, who had won all four of his fights in 2011, looked to get back in the fight with a series of leg kicks in the second round, including a headkick that momentarily dazed Diaz. But only one judge awarded him the round.
The third round was more like the first, with Diaz pushing forward with his punches and Cerrone unable to strike with a devastating blow.
"Tough dude. I promised I would fight my butt off every time, and that's the best I could do," Cerrone said.
After the first seven fights went the distance, Alexander Gustaffson and Johny Hendricks wasted no time, stopping their respective opponents in the first round.
Hendricks, a two-time NCAA champion wrestler and four-time NCAA All-American at Oklahoma State, smashed Jon Fitch with a huge left hand that forced ref Steve Mazzagatti to stop the fight just 12 seconds in.
"It feels awesome. I’ve been telling people all week that I have a left hand. I knew if I hit him with it, I could lay him out," said Hendricks, who took home a US$75,000 cheque for scoring the knockout of night and improved to 7-1 in the UFC by becoming just the second fighter to defeat Fitch. Welterweight champ Georges St-Pierre handed Fitch his only previous setback at UFC 87 in August of 2008.
The 24-year-old Gustaffson needed only two minutes longer to take out veteran Vladimir Matyushenko. The six-foot-five Swede stopped a forward-charging Matyushenko with a straight left before jumping on him with a serious of blows for the TKO victory at the 2:13 mark of the first round.
"I watched him fight when I was a kid and looked up to him. It's my dream to fight here in Vegas and I got my biggest win of my life," said Gustaffson, who earned his third win in 2011.
Featherweight Jimy (The Kid) Hettes put on a dominant performance in the opening fight of the main card, implementing his will and punishing Nam Phan with what seemed like an unlimited number of punches during a lopsided 30-25, 30-25, 30-26 victory.
Sean Pierson's up-and-down year dropped a little lower Friday night when the 35-year-old welterweight from Pickering, Ont., lost his second straight fight in the UFC, falling to South Korea’s Dong Hyun Kim by unanimous decision, 30-27 on all three judges' scorecards.
"I'm going to have to go back to the gym and then watch some tape. I just couldn't find my groove there, all the props to Kim for taking the win," said Pierson (11-6), who scored a gritty decision over Matt Riddle in his UFC debut last December, but lost via first-round knockout his next time out versus Jake Ellenberger.
Pierson held his own in a close first round, which Kim likely won with a big Judo leg sweep in the final minute. But the lanky Korean utilized his standup in the second round, landing a series of combo punches and nearly knocking out Pierson with a jumping front kick shortly before the bell.
The third round was similar to the second with Kim connecting sporadically and Pierson never quite finding his own rhythm.
"This is the happiest day of my life," said Kim (15-1-1), who bounced back after losing for the first time in seven UFC fights to Carlos Condit in July.
Brazil's Diego Nunes got the night started with a back-and-forth battle with Manny Gamburyan, taking the contest thanks to his strong leg kicks via a unanimous decision victory.
Matthew Riddle's bout with Luis Ramos was cancelled when Nevada State Athletic Commission officials ruled that an ill Riddle was not capable of fighting.
The Ultimate Fighter winners had mixed results on the undercard as Season No. 9 winner Ross Pearson scored a unanimous decision victory over Junior Assuncao, but Season 8 champ Efrain Escudero lsot to Jacob Volkmann 29-28 on all three scorecards.
Californian Danny Castillo didn't have the crowd on his side with a narrow win over Anthony Njokuani, who fights out of Las Vegas, in a split decision victory.
An under-the-weather White deemed the rare Friday night pay-per-view event a success.
"It’s been a big year, the best year ever," White said. "The biggest year for the sport and us. I look forward to the future."