The 34-year-old had previously been stopped by Sergey Kovalev and Artur Beterbiev at this level, and it was a case of deja vu as Benavidez left the Ilford fighter with a bloody nose in the sixth round before closing the contest out in the next.
Benavidez, who only stepped up to the light-heavyweight division last year, retained his WBC title as he extended his perfect record to 31 fights.
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“I’m fantastic – he’s a hell of a fighter,” Yarde told BBC Radio 5Live after the fight. “I knew how he was going to come, at the end there he just caught me with a good shot on my nose.
“I thought it was competitive. He’s got quick hands, he caught me first, hit me with a good shot on my nose.
“I stuck in there, I’m a fighter.”
Benavidez, nicknamed ‘The Mexican Monster’, touted a step up to cruiserweight to fight for Gilberto Ramirez’s WBA and WBO titles after the bout.
Yarde’s future is less certain after a fourth loss as a professional with trainer Tunde Ajayi admitting his camp was dejected.
“You saw why so many people don’t want to fight him [Benavidez],” Ajayi said. “We’re all upset but it is what it is.
“The plan was to come on strong later in the fight.”
Haney defeats Norman Jr to become three-division world champion
In the co-main event, Devin Haney claimed the WBO welterweight title over fellow-American Brian Norman Jr by unanimous decision, becoming a three-division world champion.
The 27-year-old knocked down Norman (28-1, 22 KOs) in the second round to take hold of the momentum and stayed in control behind his sharp jab as he closed out a 114-113, 117-110 and 116-111 scorecard.
Haney (33-0, 15 KOs) is a former lightweight and super lightweight world champion. He beat Jose Carlos Ramirez by unanimous decision in a 12-round welterweight bout in Times Square in February.
Earlier in the evening, Kent fighter Sam Noakes emerged with credit from a hard fought points loss as Abdullah Mason claimed the vacant WBO lightweight title.
Noakes suffered a nasty cut above his left eye following a head clash in the third round, but he dragged Mason into a brutal battle and both men were hurt to the body before the American secured a unanimous decision win with scores of 115-113, 117-111 and 115-113.
