Khan on Saturday hit Judah with hard right hand in the midsection and the American veteran crumpled to the canvas at 2:47 of the fifth round of the 140-pound unification bout at the Mandalay Bay hotel and casino.
"I am beating everyone. Bring on the next challenge," Khan said.
The 24-year-old Khan already owned the World Boxing Association light welterweight belt, and now adds Judah's IBF title to his resume.
Judah, who was a 5-1 underdog, stayed down on his knees as referee Vic Drakulich counted him out.
The 33-year-old Judah acted surprised when Drakulich stopped the fight as his record dropped to 41-7 with 28 KOs.
Khan dominated Judah who was bleeding from his nose and cuts to his face at the beginning of the final round.
Olympic silver medalist Khan, 24, raised his record to 26-1, 18 KOs as he landed three times more punches, 61-20.
Khan, who is trained by world-renowned boxing guru Freddie Roach, said they had the perfect game plan.
"We trained hard. Freddie Roach is the doctor," Khan said. "He gave me a game plan that worked because every punch I threw was hitting him on the chin.
"We knew Zab would be tricky. We wanted to be one step ahead of him. We slowly took the backhand away from him and as soon I did that all my shots were hitting him. I was not tired, I was pacing myself."
Judah was outpunched consistently in the middle of the ring and was behind on the judge's scorecards when he got knocked out with a body shot. But he claimed the fight shouldn't have been stopped because the knockout punch was a low blow. Khan didn't agree.
"He was open for a right hook," said Khan, who threw 284 punches compared to just 115 for Judah. "It was above the belt, nowhere near below the belt."
Judah said he stayed down thinking the referee was going to give him some time to the recover from the punch and was shocked when the eight count ended and the fight was over.
"That was clearly a low blow when ref started counting I thought he was giving me time to get up," said Judah.
After watching a replay of the knockout in the middle of the ring, Judah reiterated that the punch was below the belt.
"It is self explanatory. When (Drakulich) said it was over I couldn't believe it."
Judah was brought in as a replacement after Khan couldn't work out a deal to fight American Timothy Bradley, who holds the World Boxing Council belt.
Khan said he is more confident than ever of beating Bradley when they step in the ring.
"I think he (Bradley) is scared," Khan said. "If he was the champ that he says he is then he would have faced me a long time ago. Zab is a better fighter than Bradley."