The Leeds Warrior was knocked down for the first time in his career with a vicious left hook in the fourth round but narrowly recovered to survive the referee's count.
He looked to edge his way back into the contest - his first since October 2019 - but Lara forced Warrington to the canvas with a right hand to the kidney before connecting with a devastating left hook to claim a shock victory.
Warrington was attended to by the medical staff following the contest and was able to get back up and walk out of the ring.
After 16 months out of action, the Leeds Warrior had hoped to face Xu Can in a unification bout but the uncertainty caused by Covid-19 left Warrington squaring up against the hard-hitting Mexican at Wembley Arena.
Warrington sported the name and number of Leeds Rhinos legend Rob Burrow on his shorts, raising awareness to the former England and Great Britain international's fight against motor neurone disease.
Warrington was not treating Lara lightly in the build-up to the fight, with the 22-year-old boasting 14 knockouts from his previous 21 professional wins.
The Leeds Warrior inflicted a cut to the right eye of the Mexican in the early rounds despite delivering a slower start than usual.
Unbeaten in his last 11 bouts, Lara was not hesitant to trade with Warrington and delivered a stunning knockdown in the fourth.
The Leeds Warrior was able to get back to his feet and despite wobbling during the referee's count, he finished the round and gratefully returned to his corner.
He settled his way back into the fight as he looked to come back from the shock setback. Lara continued to wear Warrington down before knocking him down for a second time, with the referee waving the fight off.
Lara sported a huge bruise to his right eye following the bout as Warrington was able to walk back to his dressing room following the devastating blows from the Mexican.
Warrington has the opportunity for a rematch with Lara, revealed promoter Eddie Hearn after the fight.