The Doncaster fighter remained patient against tough resistance from late replacement Vargas in the early rounds.
And he stepped up in the second half before a flurry of shots that had the Mexican touching down saw the fight waved off in the ninth.
McDonnell began to find range as early as the second round and peppered the body of Vargas.
The straight right began to follow regularly and the gulf in class was quickly evident.
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Vargas went on the run as the fight wore on with McDonnell walking him down and firing shots in.
McDonnell finally managed to pin him down in the ninth and unleashed a barrage of shots to the body and head.
A hefty right hook saw Vargas touch down and both he and his corner showed no desire for the fight to continue, with referee Terry O'Connor waving the bout off.
Victory stretches McDonnell's record to 28-2-1 and he remains on course for a title unification fight with WBA Super champion Juan Carlos Payano in the summer.