The Team Hammerhead fighter failed to add to his four previous arm-bar wins when he was beaten by Australian-based New Zealander Joe Muir with about 30sec left in the first of five 5min rounds.
Both men looked wary of the other's power at the start of the light-heavyweight fight, but they soon closed the gap and punched freely.
Anderson landed two left hooks to Muir's head. He pressed forward, but was caught by a stinging right hand, causing him to stumble backwards.
Anderson got on his toes and moved away, but was soon trapped in the corner. He attempted a takedown, ended up on the canvas and tried to secure his trademark arm-bar, but Muir slipped out and landed some big punches from a dominant position.
Anderson was given a reprieve when Muir lost his mouthguard and both men were stood up.
They then stood toe-to-toe, loading up their punches, but despite several openings neither man adopted a down-the-pipes, straight punching approach.
Anderson closed the gap and attacked Muir's head with two knees that would have dropped most men, but Muir is not like most men. When the second knee connected, he shook it off and drove Anderson to the ground, but again he lost his mouthguard.
Back on their feet, both men swung for the knockout blow, with Muir eventually tagging Anderson with several vicious uppercuts followed by a right hook that dropped Anderson to the canvas.
Anderson could only try to cover up as Muir relentlessly attacked his head, forcing the referee to stop the fight.
While Anderson, whose record is six wins and four losses, was beaten, he never took a backward step and showed courage against an almost unstoppable force in Muir.
Anderson's team-mate, Robert Dean, did not fare much better in his Ultimate Martial Arts Fighting title fight in Christchurch.
Dean, the International Sport Karate Association's New Zealand professional middleweight champion, was beaten by Supremacy Fighting Championship titleholder Dan Digby.
In a battle between two of the best middleweights in the country, Digby stamped his superiority when he caught Dean in a rear-naked choke late in the third round.
Hammerhead coach Matt Toa was proud of both his students. Anderson did not hesitate in taking the fight on short notice, had shown a ton of guts and at 24, would be a better fighter for the experience, Toa said.
Dean had shown `'great warrior spirit'' and never gave up.
