Romero (13-2) knocked out Rockhold with a monstrous left hand at the 1:48 mark of the third round. The middleweight fight headlined UFC 221 in Perth, Australia.
Romero was able to finish Rockhold despite suffering an apparent leg injury early in the fight. Afterward, he was visibly limping and said he believes he suffered a broken leg in the first round.
Originally, the event was supposed to feature undisputed middleweight champion Robert Whittaker defending his title against Rockhold. Whittaker, however, was forced off the card because of an injury, and the UFC replaced him with Romero. The new fight between Rockhold and Romero was supposed to be for the interim middleweight title.
On Friday, however, Romero, 40, missed the 185-pound weight limit by 2.7 pounds, which means he was ineligible to claim a title, even with a victory Saturday.
"I'm so sorry for Robert Whittaker," Romero said immediately after his win. "He is the guy, but this is the plan of God. Second, I'm so sorry for the weight cut. This was the first time in my career I could not get my body down. Rockhold is a very good athlete and an amazing fighter. ... I'm very happy because I fight this time with the best."
UFC president Dana White told ESPN that Romero will be Whittaker's next title challenger. That fight will be a rematch of a closely contested five-round bout last July.
Whittaker (19-4) defeated Romero via unanimous decision. Romero won the first two rounds but appeared to run out of gas in the last 15 minutes.
His performance against Rockhold indicated that he learned from those mistakes. Romero was incredibly efficient against Rockhold. According to Fightmetric, he landed 52 of 99 attempted strikes and did not attempt a single takedown.
A former UFC and Strikeforce champion, Rockhold (16-4) managed very little significant offense. He scored points in the form of leg kicks and a steady jab, but he never completely settled into a rhythm.
The finish was lightning quick, as Romero darted in with his signature left hand. Rockhold fell awkwardly on his backside along the fence, and Romero landed one follow-up left hand that put him away.
All four of Rockhold's professional losses have come via knockout. He lost his UFC title in a stunning upset to Michael Bisping in June 2016 via first-round knockout.