The Briton, 29, has lost all three of his IBF, WBA and WBO heavyweight titles in front of a disbelieving crowd in New York City.
Anthony Joshua has been beaten by unfancied Mexican fighter Andy Ruiz Jr in one of the biggest shocks in heavyweight boxing history.
The Briton, 29, lost all three of his IBF, WBA and WBO heavyweight titles after being stopped in the seventh round in front of a disbelieving 20,000-strong crowd at Madison Square Garden in New York.
He had spent much of rounds four to six recovering from what was possibly the most damaging round of his career in the third, during which he was knocked down twice.
Ruiz sent him to the deck twice more in the seventh round, and – despite returning to his feet – referee Mike Griffin stepped in to bring the clash to an end.
It is the first time Joshua has tasted defeat, leaving his underdog opponent to become the first ever Mexican-American heavyweight world champion.
Ruiz was only drafted in to fight Joshua after the Briton’s original opponent, Jarrell Miller, failed a drugs test.
“This is what I have been dreaming about and I cannot believe I made my dreams come true,” said Ruiz, who Joshua managed to knock down once in the third round.
“That was my first time getting dropped on the floor but it made me want it even more – and I just thank God. I have got that Mexican blood in me and that just proved it. Right now, I just want to celebrate. I made history for Mexico.”
Joshua was not in the mood to offer excuses for his performance and paid tribute to his opponent.
He told Sky Sports Box Office: “Boxing is a tough sport, but I train hard and I got beaten by a good fighter, it will be interesting to see how far he goes, but this is all part of the journey.
“This is the risk we take, every fighter deserves respect so congratulations to him. I respect every fighter, this is all part of the legacy, it’s how strong I came back. He’s a champion for now, I shall return.”
Joshua had beaten 22 opponents without defeat before his Saturday night fight against Ruiz, and apologised to his fans who had bought tickets for the match.
“Sorry I let my fans down,” he said.
Promoter Eddie Hearn said a rematch between the pair would likely be arranged for later in the year.
He said: “He will come back. It’s now down to the rematch and winning that fight. He must win that fight and he will do anything he can to regain his title. To get back to the heights he has been, he must win that rematch.”
Two of the other top heavyweights in the world, Tyson Fury and Deontay Wilder, reacted to Joshua’s defeat on Twitter.
Fury tweeted: “We have our back and forths but @anthonyfjoshua changed his stars through life. heavyweight boxing, these things happen, rest up, recover, regroup and come again.”
However, Wilder was critical of Joshua, saying that “he wasn’t a true champion”.