Machida (24-8) finished the fight at the 1:00 mark of the round, when he rocked Belfort (26-14) with a rear kick to the face. It was similar to his front kick knockout of Randy Couture in 2011 and Belfort's infamous front kick knockout loss to Anderson Silva in 2011.
Immediately after the bout, Belfort, 41, took off his gloves and placed them in the Octagon -- a symbol of retirement. The Brazilian legend was on the final fight of his UFC contract and is not expected to re-sign with the promotion.
"Everything in life has a beginning, middle and end," Belfort said. "It's time for me to take care of my family and endeavors."
Machida, 39, did not follow up with punches after the kick, as Belfort was clearly out. It was a perfect result for the former light heavyweight champion in front of a friendly crowd in Rio de Janeiro.
Machida, who fights out of Los Angeles, is now on a two-fight win streak. He called out former middleweight champion Michael Bisping, who has been flirting with the idea of retirement himself after a knockout loss last November.
"I was looking for the right moment. All I need is one strike to end the fight," Machida said. "Michael Bisping, I'm still waiting for you. I want this fight. Before you retire, you've got to fight me first."
If this proves to be Belfort's last fight, it marks the end of a long, brilliant career. He made his professional debut in October 1996 and his UFC debut several months later. He won a one-night tournament at the age of 19 at UFC 12.
Belfort fought the likes of Couture, Silva, Wanderlei Silva, Chuck Liddell, Tito Ortiz and Jon Jones during his career. He was at the center of a testosterone-replacement-therapy (TRT) controversy years ago. That therapy was widely banned in the sport in 2014.