For Smith, it represented a huge step up as he looked not only to extend his undefeated record, but a chance to move into the discussion where titles were concerned.
The 34-year-old has challenged three times for world titles at 140lbs, while for Smith he was fighting for the first time this year.
Zepeda made a few heavy connections in the opening rounds but Smith appeared dangerous in his own right with some significant combinations.
Zepeda's fight lasted less than a round longer when the southpaw found himself on all fours, unable to recover. A huge right hand was followed up moments later by a devastating shot into the liver which caused the Mexican-American to collapse in agony.
Smith will now look ahead for his next fight in 2024. In the same division, Jack Catterall and Josh Taylor fight on May 25 (live on DAZN), opening up a huge all-British clash between Smith and the winner.
By winning the WBC silver super lightweight championship, he could conceivably be in the mix for the winner of Devin Haney, the current WBC champion, and Ryan Garcia - also live on DAZN.
Another young Briton, Adam Azim, has been mentioned as another enticing opponent for the unbeaten 27-year-old, and Smith called for a fight against Azim in the ring after his win.
Earlier in Sheffield, and first up on the broadcast, Nico Leivars kept his unbeaten record as the super bantamweight stopped Piotr Mirga.
Leivars suffered an early cut but was kept in the fight by his cutman. In the ninth round - the furthest he had ever reached in his career - he unleashed a flurry of blows to earn a knockout.
Campbell Hatton started brightly against Central Area super lightweight champion Jimmy Flint, but the incumbent held his own over 10 rounds.
Hatton’s father Ricky won this belt over two decades ago as he climbed up the levels in his own career, but a 98-92 97-94 97-95 unanimous decision favoured the champion who fell to his knees in celebration.
Sandy Ryan defeated the experienced Terri Harper in the fourth round, keeping hold of her WBO welterweight strap.
Troy Williamson came in over the agreed weight for his super welterweight clash against Ishmael Davis, meaning the former champion was ineligible for the spoils had he won the eliminator for the British title.
Davis was on top throughout as he won a unanimous decision with a path clear to become champion later this year.
Live on DAZN: Watch Dalton Smith vs. Jose Zepeda on March 23