Britain's Bisping knew victory would open the door to a potential crack at Anderson Silva but an expertly-delivered head kick at the start of the second round put paid to those hopes.
Brazilian Belfort, a former UFC heavyweight tournament winner and former light-heavyweight world champion, landed a left high kick to floor Bisping.
The Brazilian then jumped on the Cyprus-born fighter and delivered a flurry of blows before referee Dan Miragliotta decided to call an end to the fight with 1:27 gone in the round.
"It was a beautiful kick. He caught me. He was better than me tonight," Bisping said.
Belfort has twice before fought for title belts, losing on each occasion, and he now has his eye on a third attempt.
"I want that belt," he said. "Get that punk Chael Sonnen out. Let me fight Jon Jones! Not that clown!"
In other action on the night, C.B. Dolloway took a thrilling win in the co-main event over Daniel Sarafian, who was making his UFC debut.
Gabriel Gonzaga registered a second-round submission win over Ben Rothwell and Khabib Nurmagomedov wasted no time in beating Thiago Tavares in the first fight of the undercard.