Rockhold brought Bisping to the canvas early in the second round and followed up with a guillotine hold before the Englishman tapped out at 57 seconds into the second round.
"I caught him real clean, that was full shin at the thickest part right on top of the head," said Rockhold at the post-fight press conference wearing a sharp checked suit and sunglasses. "It was definitely an exciting moment and I go for the kill like always."
It was No.5 ranked Rockhold's (13-2) 12th victory in his past 13 fights and improved the American's claims on a shot at the winner of the middleweight championship title fight between Chris Weidman and Vitor Belfort next year.
"I don't care, I'll fight whoever," said the American on his next likely opponent. "Whether it's Jacare (Souza), (Lyoto) Machida has a fight coming up to. We've separated ourselves as the number one contenders and I'd be glad to prove myself again against one of them."
For 35-year-old Bisping (26-7) his fourth loss in his past seven bouts is likely to end his chance of earning a shot at the divisional title but not end his career.
"The better man won tonight, and congratulations to him" said Bisping. "I still love what I do, still love this. I'm a fighter, I was born a fighter and I always will be a fighter."
"While there's a pulse and a beat in my heart I'll still fight."
It may have been the first meeting between the two high-profile middleweights but the much-hyped animosity stemming from a 2012 sparring session made its way into the bout as both fighters clashed heads in the first round, requiring the cage side doctor to treat a cut above Bisping's left eye.
"He beat me fair and square, but the headbutt when it came in, I can't really remember anything after the headbutt to be honest, but that's the way it goes" said the Englishman.
Bisping of Manchester, England, was a clear crowd favourite, but appeared hampered by nerves in early exchanges with Rockhold, who found his rhythm early and repeatedly kicked at Bisping's body.
Rockhold of Santa Cruz, California, had finished his previous two opponents, Tim Boetsch and Costa Philippou, in the first round and it didn't take him much longer to get the better of the No.9 ranked Bisping.
Early in the second round, a Rockhold strike brought Bisping to the canvas and Rockhold pounced, landing several punches to Bisping's head, before performing a guillotine-choke hold which clinched a victory he said was one of the most important of his UFC career.
"It's definitely up there," said Rockhold. "It's a big proving ground for me against an elite guy like Michael and to perform the way I did says a lot."
In other main card fights, Soa Palelei beat Florida's Walt Harris by technical knockout in the second round in the heavyweight division, and Australia's Robert Whittaker survived a back-and-forth brawl to beat Clint Hester of Atlanta, Georgia, by TKO in the middleweight division.
Al Iaquinta of Wantagh, New York, produced a stunning combination of punches to beat Ross Pearson by TKO at 1:41 into the second round for his fifth win in his past six fights in the lightweight division.
In a preliminary bout, the oldest fighter on the card, 42-year-old Anthony Perosh won by submission against Guto Inocente at 2:38 in the first round of their light heavyweight bout to the delight of the Sydney fighter's home town support.