The two fighters traded blow-for-blow in every round, but after stunning his opponent, Rios unloaded with a barrage of punches, forcing the referee to jump in.
The win has reportedly taken 26-year-old Rios to the top of the queue to fight Manny Pacquiao.
The Filipino has a December 8 showdown with Juan Manuel Marquez to negotiate first, but his promoter Bob Arum has already been talking about a 2013 fight against Rios.
"You see what happened to Mike Alvarado, I could do that to [Pacquiao]," Rios said after the fight.
"I think Alvarado hits harder than him, Pacquiao is a more in-and-out guy.
"You know what? Like always I will listen to Julio Chaves Sr - break the body and the head will fall."
Rios has improved his record to 31-0, with one draw.