Diaz used his size and striking to soften Miller up, often in the clinch. Then he reversed a takedown attempt to lock on a guillotine that forced a bloody Miller (21-4) to tap out at four minutes nine seconds.
Miller lost his mouthpiece during the move and had his tongue out jammed between his lips as Diaz cranked on his neck and head.
"He had my number ... He was landing strikes and hurting me," said Miller.
The six-foot Diaz (16-7) had four inches in height and five inches in reach on Miller, a New Jersey native.
"I know he's a great fighter, I have nothing bad to say about the guy," said Diaz, who took time out afterwards to pronounce training partner and Strikeforce champion Gilbert Melendez as the best lightweight in the world.
Earlier, middleweight Alan (The Talent) Belcher stopped Brazilian submission specialist Rousimar Palhares in the first round, fighting off the Brazilian's submission attempts and then using ground and pound to finish him off at 4:18.
The five-foot-eight Palhares (23-4) is known for his leglocks and things looked bad for Belcher when he was taken down early. But Belcher, a Brazilian jiu-jitsu black belt in his own right, showed he has serious ground skills of his own.
The six-foot-two Belcher (17-5) eventually took top position and stunned Palhares with a heavy elbow from above. He then finished Palhares off with a flurry of blows.
"I was so ready I wasn't scared of this fight," said Belcher.
"Baby that (championship) belt is mine. I'm coming for it and I think you know it know," he added.
Welterweight Johny Hendricks won a split decision (29-28, 28-29, 29-28) over veteran Josh Koscheck in a battle of former collegiate wrestlers with heavy hands.
Hendricks (13-1) was bothered by an accidental eye poke in the first round but survived. Both men scored with strikes.
Koscheck (19-6) began to show damage to the face in the second round and Hendricks continued to find his mark in the third. Koscheck, who required facial surgery after his failed title challenge to Georges St-Pierre, did manage a takedown in the final round and was on top when the final hooter went.
"That's one tough dude man, I hit him with everything I've got," said Hendricks, who also has a win over Koscheck's friend and training partner Jon Fitch.
Heavyweight Lavar (Big) Johnson stopped Pat (HD) Barry in the first round, firing away at the fence until Barry dropped and the ref stepped in at 4:38.
Barry (7-5) hit the former Strikeforce fighter with kicks and put him down earlier in the round, attempting a submission on the ground. But Johnson (17-5) got back up and sent Barry backwards with a big kick before firing more than three dozen punches, knees and elbows at the fence.
"Pat's a very tough guy," said the six-foot-four 253-pound Johnson.
In an all-Canadian bantamweight bout on the undercard, Winnipeg's Roland Delorme (8-1) submitted Ottawa's Nick (The Ninja of Love) Denis (11-3) at 4:59 of the first round.
Delorme survived some hard shots before rallying to take Denis' back and sink in a rear naked choke.