The 30-year-old's third career defeat and first by KO leaves him in heavyweight limbo with Joyce now earning the right to be next in line against Oleksandr Usyk for the WBO world title.
The former world champion's two other defeats to Anthony Joshua and Dillian Whyte in 2018 were both by decision.
Britain's Joyce dominated today's fight in Manchester and appeared ahead on points before dropping Parker with 2.08 left in the 11th round.
A courageous Parker did well to stay in the ring that long, time and time again bouncing back from heavy blows by Joyce.
He suffered a cut eye midway through the bout which his corner couldn't stop throughout the remainder of the fight and continued to keep coming at the Brit.
However, Joyce dropped the Kiwi with a left hand and he wasn't able to get up from the 10-second count.
It's a question of what now for Parker, who only recently signed a multi-fight deal with Sky Sport UK.
Victory would have lined up another shot at the title, but a defeat by such a convincing manner puts him back in middle of the heavyweight pack once again.
Joyce praised Parker for his efforts in the defeat saying he had to throw everything at the Kiwi.
"It was a tough fight and praise to Joseph Parker because he's improved and given me a tough fight. I really enjoyed it. I had to dig deep to get through the rounds.
"I hit him with everything I've got. Literally the kitchen sink. The handbag and everything. Body shots… I tried it all and he still kept coming forward. I managed to drop him at the end - but it was hard work," Joyce said after his win.
