The Nigerian-born Brit sent a battling Povetkin to the canvas with a barrage of heavy artillery in the seventh round and then floored the Russian veteran again to bring an end to a pulsating encounter.
Joshua, 28, secured his 22nd professional victory – and the first stoppage of Povetkin’s career – as he returned to the scene of his epic win over Wladimir Klitschko last year.
The packed, rain-drenched arena was lit up by pyrotechnics as Povetkin, decked out in a black robe, marched towards the ring, followed by the home favourite, whose entrance was announced by a rapper and raucous cheers from the huge crowd.
But the battles cries turned to gasps at ringside in the first round as Joshua was staggered by a left hook from Povetkin, who had menacingly stalked through the opening few minutes.
With blood dripping from Joshua’s injured nose, Povetkin waited for another moment to pounce in the second and again found his range with a hurtful hook.
The 39-year-old Russian continued on the offensive in the third, but Joshua ducked low to deliver a hook, and followed it up with crisp counters which signalled a turn in the tide.
A wayward elbow opened a cut over Povetkin’s right eye in the fourth, briefly stalling his charge, and Joshua tried to force him onto the back foot with stinging jabs.
After using his accurate left to neutralise the Russian’s charge in the sixth, Joshua created an explosive finale to the fight in the seventh to end the bout.
A bombing right hand sent shockwaves through the legs of Povetkin, and a left hook followed by a right sent him crashing to the canvas. Povetkin, down but not out, clambered upwards in a daze and Joshua unloaded a succession of crippling shots to seal a smashing win.