Liddell toppled and Jackson jumped in to throw a couple of punches for good measure before referee John McCarthy stepped in at 1:53 of the first round to protect the fallen champion. Only a few punches were thrown before the one that tagged Liddell and at one point Jackson, who had been stalking the champion, raised his hands as if to ask what was going on.
The two traded blows and then Jackson nailed Liddell.
"I made a mistake and got caught," said Liddell, the reigning rock star of mixed martial arts and the face of the UFC.
Jackson defeated Liddell by TKO in November 2003 at a Pride Fighting Championships show in Tokyo. Liddell went on to win his next seven fights, avenging previous losses to Randy Couture and Jeremy Horn along the way. But Jackson remains his nemesis.
Liddell fell to 20-4, while Jackson improved to 27-6.
"Rampage" Jackson, 28, entered the MGM Grand Garden Arena wearing his trademark rumble chain, howling like a wolf. But the crowd roar was reserved for the 37-year-old "Iceman."
Jackson just waited in the ring from Liddell, ready to do business. He was booed when introduced in the ring.
On the undercard, light-heavyweight Houston Alexander upset Keith "The Dean of Mean" Jardine, crumpling the favorite with a series of hammer-like blows to the head. The slugfest ended with a knockout after just 48 seconds, with Alexander smashing Jardine with an uppercut that sent his mouthpiece flying.
Alexander improved to 6-1, and Jardine dropped to 12-4-1.
Also, Karo "The Heat" Parisyan and Josh Burkman traded blows in an entertaining welterweight contest. Parisyan, whose background is in judo, showed good striking power and accuracy, wearing Burkman down en route to a unanimous decision.
Canadian middleweight Kalib Starnes unanimously outpointed Chris "The Crippler" Leben to raise his record to 10-2-1. Leben fell to 16-4.
Brazil's Thiago Silva won his UFC debut when James "The Sandman" Irvine injured his knee at 1:06 of the first round and was unable to continue.