The defending champion dominated the fight from the start and had Williams on the canvas in the first, third and seventh rounds at the Mandalay Bay Resort and Casino in Las Vegas.
When he knocked Williams down with a vicious right cross again after one minute 26 seconds of the eighth round referee Jay Nady decided the courageous challenger had taken enough punishment and ended the fight.
Williams was taken to hospital after the fight for a CAT scan and was set to be kept in overnight as a precautionary measure, his promoter Frank Warren said.
"Obviously Danny is very disappointed. He never got over the first round," Warren said, adding Williams' corner was about to stop the fight at the end of the eighth round.
"Vitali dominated the fight," Warren added.
Williams, who weighed in at his heaviest ever 270 pounds, seemed unable to block the attacks of his quicker and taller
The 6 feet 7 inch Ukrainian giant was 20 pounds lighter despite a six inch height advantage and looked stronger and fitter than his opponent.
"I feel this was the best performance of my career," Klitschko said after the fight, dedicating his win to democracy in Ukraine.
Klitschko had considered pulling out of the fight to join the crowds who flooded the streets of Kiev following Ukraine's much disputed presidential election recently.
"I was surprised that Danny Williams was able to take so many punches. He has a strong chin," Klitschko added.
Klitschko was also taken to hospital after the fight for an X-ray on his left hand which was badly swollen after inflicting so much punishment on Williams.
The champion was making his first defence of a title he won in April when he defeated South African Corrie Sanders.
Williams won the right to fight for the title by defeating former undisputed champion Mike Tyson in July.