With the build-up overshadowed by unpleasant exchanges during Thursday's final pre-fight press conference, there was little love lost between the fighters as they walked out to a packed AO Arena.
Smith, a former WBO light-middleweight champion with 32 wins from 36 fights, made the better start and although Eubank Jr recovered, he was put down twice in the fourth before the referee stepped in to end the contest.
With the public slanging match done and the action finally under way, it was Liverpudlian Smith who made an early impact when landing a short right hand in the first round.
Eubank Jr regrouped for the second, following up a jab with a couple of slick combinations as he looked to get back on level terms and then broke through with some uppercuts in the third round.
The contest, though, was brought to a swift conclusion in the fourth round when Smith forced Eubank Jr into the corner and then sent him onto the canvas with a left uppercut and hook combination.
Although Eubank Jr bravely got back to his feet, he was soon down again from another right-hand shot which prompted referee Victor Loughlin to step in and give Smith a fourth straight victory which puts him in prime position for a shot at a second world title.
"I don't know if it was one shot or an accumulation, but I told you all week," Smith said on Sky Sports Box Office following his victory.
"A lot got made of Chris' great chin, I've got a great chin, but there's many fighters with better chins who have been knocked out in the past.
"I told you all week, don't be surprised, nobody can not be hurt."
Eubank Jr paid tribute to Smith's victory, and looked to make amends for their heated pre-fight exchanges.
"Big congratulations to him. He caught me with a great shot," Eubank Jr said.
"The build-up was the build-up, it got a bit ugly at the end. I regretted that. I respect you, I respect your family, I always have.
"If the fans want to see a rematch, we can get it on at Anfield. Big respect, man."
Earlier on the undercard, Richard Riakporhe put himself in the frame for a world title shot as he stopped former WBO cruiserweight champion Krzysztof Glowacki in the fourth round.
'The Midnight Train' had troubled Glowacki with a booming right hand shot in the second round and remained on the front foot.
Londoner Riakporhe, 33, went on the offensive again in the fourth and pushed Glowacki into the corner, with the referee swiftly stepping in to save the Polish fighter further punishment.
Former heavyweight champion Joseph Parker defeated Derbyshire's Jack Massey on points after 10 rounds.
In a first fight since losing against Joe Joyce in September, New Zealander Parker outscored Massey, who has stepped up from cruiserweight, in a unanimous decision.
Ekow Essuman retained his British and Commonwealth welterweight titles on a majority decision over Chris Kongo, with one of the judges scoring the contest even.