The win for the self-styled ‘Gypsy King’, fighting on UK soil for the first time in four years, was witnessed by 94,000 fans in London - a post-war British record crowd.
Unbeaten Fury, 33, had said this would be his last fight and announced immediately afterwards: “This might be the final curtain for the Gypsy King. And what a way to go out.”
After a cagey opening the defending champion took the initiative, controlling the fight and landing some telling blows to the head and body of his opponent.
Whyte could have few complaints at a halt being called with just one second remaining before the fight reached the midway point as he was clearly on unsteady legs after the first significant strike of the bout, a brutal right uppercut from Fury.
The 6 feet 9 inch (206-centimetre tall) Fury was able to use his considerable height and reach advantage to keep Whyte at bay while the challenger was made to look clumsy and cumbersome.
Whyte, cut over his right eye after an accidental clash of heads, was first installed as the WBC’s number one contender nearly four years ago but he was unable to impose himself.
“I’m overwhelmed with the support,” said Fury. “I can’t believe that my 94,000 countrymen and women have come here tonight to see me perform.
“I just want to say from the bottom of my heart, ‘Thank you so much to every single person who bought a ticket here tonight or stayed up late to watch it on TV’.”
If Fury does follow through with his plan to quit, he would spurn the chance to face either Oleksandr Usyk - the current WBA, IBF and WBO champion - or fellow British fighter Anthony Joshua for the undisputed crown.
No boxer has held all the major world heavyweight belts since Britain’s Lennox Lewis, who became the undisputed champion in 1999.
But Fury, now unbeaten in 33 fights, appears to be sticking to his guns.
“I promised my lovely wife Paris of 14 years that after the Wilder three fight, that would be it,” he said.
“And I meant it. We had a war. It was a great trilogy. And I meant that. But I got offered to fight at Wembley at home, and I believe that I deserved - that I owed it to the fans.”
Jamaica-born Whyte, 34, was greeted with boos as he emerged into the cavernous stadium, dressed in black.
Excitement levels hit fever pitch as Fury entered to the strains of Don McLean’s “American Pie”, which accompanied a video montage of his career.
Fury, wearing a white and red robe and gloves featuring the Cross of St George - the flag of England - sat on a gold throne as fireworks shot into the air before jogging to the ring.
After delighting the crowd with his victory, he led them in another rendition of “American Pie”.
Fury hailed Whyte as a “warrior”, predicting he would be a world champion one day but said his opponent had met a “great” in the sport.
“I’m one of the greatest heavyweights of all time,” he said. “And unfortunately for Dillian Whyte, he had to face me here tonight. There’s no disgrace.”