Galahad was slammed to the canvas by a big right hand at the start of the sixth round as the Spaniard claimed the title at the age of 35.
Galahad had won the vacant crown over fellow Briton Jazza Dickens in August and started as hot favourite against a fighter whose best days were assumed to be behind him.
Martinez fought two thrilling battles with Carl Frampton in 2013 and 2014 then was narrowly out-pointed by Josh Warrington in Leeds in 2017.
But a points loss to inexperienced Zelfa Barrett in February had appeared to spell the end of Martinez’s hopes of wresting back a version of the world crown.
The technically-gifted Galahad looked set for an expected emphatic points win as he cleverly picked apart his opponent through the opening rounds.
But Martinez seized his chance to swing the fight in his favour when he floored Galahad out of the blue with a right hand at the end of round five.
Galahad’s corner desperately tried to rouse him in between rounds but at the bell Martinez stalked across the ring and delivered another hammering right which immediately ended the contest.
Earlier in the night, IBO and WBC super featherweight champion Terri Harper lost her belts as she was knocked out in the fourth round of her contest against Alycia Baumgardner.
The American caught Harper with a ferocious shot that left her standing dazed in the middle of the ring, as the referee jumped in to wave the fight off before anymore damage could be inflicted.
Harper, who won the title in 2020 a little over a year after quitting a part-time job in a chip shop to focus on boxing, signed a deal with Matchroom that would elevate her career.
After the fight she tweeted: “Just letting everyone know I’m fine, just heartbroken.
“The biggest congratulations to my opponent. This is boxing. I’m back off to the chip shop.
“Love you all, thank you for your support, logging out for a few days.”
Both South Yorkshire fighters have rematch clauses in place which they could activate.
Earlier in the night, Wakefield welterweight Dom Hunt claimed the Central Area title with a thrilling points win over the previously-undefeated James Flint.