The big Briton sent the 37-year-old Cameroon-born former UFC heavyweight champion, a two-fight professional boxing novice, to the canvas in the opening round with a straight right to the chin.
The "Knockout Chaos" fight then lived up to its billing in spectacular fashion as Joshua sent him crashing again in the second, first with a right-left combination and then an explosive right after he had beaten the count.
The referee stepped in and stopped the fight, with Joshua declared the winner by knockout victory and Ngannou out cold and receiving treatment before getting back, stunned, to his feet.
Far more had been expected from Ngannou after he knocked down WBC champion Tyson Fury in his first bout in Riyadh in October and went on to lose on a split decision, but Joshua was merciless.
"It is what it is," he told the crowd, teasing out the words.
Fury, who fights Ukraine's WBA, IBF, WBO and IBO champion Oleksandr Usyk in a rescheduled unification bout in Riyadh on May 18, was watching from ringside.
"I'm just here to fight. I'm going to go back to my cage, lock myself away, and then I'm going to be let out when it's time to fight again," said Joshua, hungry for a chance against the winner of the Usyk v Fury fight.
Joshua's promoter Eddie Hearn sent out his own call: "There's a brilliant fighter down there in Tyson Fury. Please beat Oleksandr Usyk, because you will get the biggest fight of all time," he said.
"That is one of the most destructive knockouts I've ever seen."
Joshua said he had told Ngannou he was an inspiration and he could come again.
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