Sanders recorded a second-round technical knockout of the heavily favored, 6-foot-6 Klitschko, dropping him twice in each round with big left hooks. Referee Genaro Rodriguez stopped the fight with 27 seconds left in round two.
"I thought I could beat one of the best heavyweights in the world," said Sanders, who was knocked out by former champion Hasim Rahman nearly three years ago in his last fight. "I'm sure tonight I proved it."
After being introduced as older brother, Vitali, Klitschko was knocked down twice in the final 34 seconds of the first round and never recovered. It's only a matter of time whether his career does.
"I'm really diappointed, but I know I just have to learn," said Klitschko, who has fought in 15 different German cities. "It's a long life. You just have to learn."
Klitschko suffered just his second loss, falling to 40-2 with 37 knockouts. He was seeking his sixth successful title defense of the lightly regarded WBO crown.
Sanders improved to 39-2 by recording his 29th knockout. He won his 24th consecutive fight and just missed his 19th first-round KO.
After the fight, Vitali Klitschko, the top-ranked heavyweight contender in the WBC and WBA, twice challenged a stunned Sanders, whose eyes widened in disbelief over the ease of the victory.
"That's a bad sportman, to be honest," said Sanders, who landed 15 of 39 punches. "He came to me and said, 'I'll get you back.'"
The ring announcer, a German actor, introduced Sanders, then Klitschko, whom he called Vitali instead of Wladimir. Klitschko entered the ring stone-faced while Tina Turner's "Simply the Best" played for the crowd of 11,500.
While he is regarded as a heavy puncher, Sanders appeared to surprise Klitschko with his hand speed.
"He's a tough fighter, and has really quick hands," Klitschko said. "The mistake was that I would like to shoot him with my right hand. He was faster than I was."
"I took him seriously enough," said Klitschko, who landed three of 16 punches. "All big champions have lost. Of course, I will give my best and will have a rematch, then I will show what I can do."
2014: The Year in Music [PHOTOS]