Tszyu, back in the ring for the first time since he fell to Sebastian Fundora in March, hit the canvas three times in the second round as Russian Murtazaliev used his powerful left hook to supreme effect.
Tszyu tried to shake off the punishment, continuing to come forward and even landing a few damaging blows.
But when he was knocked down a fourth time in the third round his corner threw in the towel at 1:55 of the round.
Murtazaliev improved to 23-0 with 17 knockouts, defending the title he won with a knockout of Jack Culcay in April.
Tszyu, a former WBO world champion, had hoped the bout would be a triumphant return after he suffered an ugly gash on his forehead that hindered his vision against Fundora.
Instead he fell to 24-2 as his aggressive tactics backfired.
"The better man won tonight," said Tszyu, whose father, former world champion Kostya Tszyu, was ringside. "No excuses there."
