Fury, whose previous fight with Wilder, in Los Angeles in 2018, ended in a draw, knocked down Wilder in the third and fifth rounds -- and dominated the bout until Wilder's team threw in the towel during the seventh round, according to the Associated Press.
"The king has returned to his throne!" Fury said after the fight.
The nrematch was billed as one of the biggest heavyweight title fights since Lennox Lewis defeated Mike Tyson nearly two decades ago.
Referee Kenny Bayless ended the bout at 1:39 of the seventh round after it was clear Wilder was taking a severe beating, with blood seen pouring from one of his ears.
Video posted on social media appeared to show Fury trying to lick blood off Wilder's neck during the fight.
The loss -- in Wilder's 11th defense of the championship he won in 2015 -- was his first in 44 fights, the AP reported.
The rematch drew a sellout crowd and was expected to set records for live gate receipts and do well as a pay-per-view broadcast. Both fighters were guaranteed $5 million but could see compensation as high as $40 million, according to AP.
In their previous fight in 2018, Wilder came in as the undefeated defending WBC heavyweight champion and Fury came in as the former WBA, IBF, WBO, IBO, The Ring and lineal heavyweight champion.
The fight took place at the Staples Center in Los Angeles and ended in a controversial split decision. The scorecards read 115-111 Wilder, 114-112 Fury and 113-113.
Fox News' Ryan Gaydos and The Associated Press contributed to this story.