Hatton, 30, improves to 45 wins (32 KOs) and one defeat, while Malignaggi falls to 25 wins (five KOs) and two defeats.
While the Grand Garden Arena was by no means full, most of the estimated 9,053 in attendance were supporting Hatton.
Hatton, wearing a fat suit, was accompanied to the ring by Oasis' Gallagher brothers, who were charged with carrying their fellow Manchester City fan's belts.
Hatton suffered his only defeat as a professional at the same venue last December, when he was stopped in 10 rounds by Floyd Mayweather Jr, making his victory doubly sweet.
"I enjoyed it better than last time I was here, that's for sure," said Hatton.
"I've just come into a new camp and I've been working on new things. Floyd and I have been together for seven or eight weeks and it doesn't happen overnight.
"But I showed glimpses of what I can do. And after being with Floyd for seven weeks, I think that's pretty impressive."
Malignaggi, 27, started brightly, snapping out his jab in the first round and causing some swelling under Hatton's left eye.
But Hatton found his range in the second, landing with a chopping right cross that had Malignaggi hanging on for dear life round Hatton's waist.
Ricky Hatton was in good form from the start
Hatton stiffened Malignaggi with big left hooks in rounds three and four, by which time it was becoming increasingly obvious that Malignaggi's jab alone was not going to be enough to keep Hatton at bay.
Having called for referee Kenny Bayless to snuff out any wrestling from Hatton in the build-up to the fight, it was Malignaggi who was doing most of the clinching.
By round six the fight had become a strangely muted affair, with the crowd sensing that Malignaggi did not possess the weaponry to put their hero in any trouble.
Malignaggi, whose right hand has been operated on four times, was barely throwing it by the middle rounds, and a neat combination from Hatton had the New Yorker reeling again in the seventh.
Rounds eight, nine and 10 followed a similar pattern, with Hatton using his movement to bypass Malignaggi's jab time and time again to deliver hurtful hooks and crosses.
By round 11, Malignaggi was merely surviving, and following another rash of swinging left hooks from Hatton, his trainer Buddy McGirt had seen enough. Malignaggi was in no real trouble and was clearly upset, shoving McGirt in the chest. But having won just one round on all three judges' scorecards, it was a justifiable decision.
The stoppage was the first suffered by Malignaggi in his career and he was furious with the decision after going the distance with Miguel Cotto in 2006 despite suffering a fractured jaw and broken hand.
"The disappointment of the whole night, apart from losing, is that I think I'm better than getting stopped," he said.
"I was a lot worse in the Miguel Cotto fight. Miguel's a bigger puncher than Hatton. I'm not saying who's better now, I'm just saying I felt like I hurt worse in the Cotto fight.
"I figured I had a round and a half left. I understand I'm behind on the scorecards and I might not have won the fight but it's a TKO (technical knockout) on my record and I shouldn't be stopped. I'm better than that.
"I understand nobody wants to get hurt and nobody wants to see anybody get hurt.
"I've been hit with harder shots and won fights so I feel I should and could have finished the fight."
Although the fight was only for the lightly-regarded IBO light-welterweight belt, Hatton cemented himself as the pre-eminent fighter in the division.
No-one will ever beat me at junior-welterweight, no-one. But what sort of a champion would I be if I didn't take them (De la Hoya and Pacquiao) on next?
Hatton told BBC Sport afterwards that Mayweather Jr, the son of his trainer Floyd Sr, has come out of retirement, raising the possibility of a rematch some time next year.
The impressive nature of his win has also raised the possibility of a match with the winner of Oscar de la Hoya-Manny Pacquiao in Las Vegas on 6 December.
"I've had 46 fights now and only lost one - and he was the best pound for pound in the world," Hatton said of Mayweather Jr.
"No-one will ever beat me at junior-welterweight, no-one. But what sort of a champion would I be if I didn't take them (De la Hoya and Pacquiao) on next? That's what Ricky Hatton is all about.
"I've certainly put myself in the shop window, and after another training camp with Floyd, I think I'll get even better.
"If I'm going to have another two years left, I want big fights. If I have to move up to 147lbs again, let's do it."
Hatton's win completes a British hat-trick over American fighters, following Joe Calzaghe's win over Roy Jones Jr in New York a fortnight ago and David Haye's defeat of Monte Barrett in London last week.
On the undercard, Matthew Hatton easily outpointed Ghana's Ben Tackie, who his older brother also beat back in 2003.
This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.