Australia's George Sotiropoulos has continued his unbeaten run inside the Octagon with a convincing second round submission victory over American Joe Lauzon at UFC 123.

Sotiropoulos showed great patience and technique to eventually secure a kimura and then the win to help further his claims for a title shot in the lightweight division.

The win takes Sotiropoulos' unbeaten run to 7-0 inside the UFC and his fourth via submission, further highlighting the Australian's jiu-jitsu ability.

It wasn't all easy going for Sotiropoulos though as Lauzon used his takedown defence to keep the fight on the feet in the first round.

Lauzon used his jab to keep Sotiropoulos at bay and landed several punches including a left hook that left his opponent momentarily dazed.

Lauzon also landed a knee to the head when Sotiropoulos attempted one of his many takedowns in the opening round.

Late in the round Sotiropoulos managed to complete a takedown and ended up on top of his opponent before the bell saved Lauzon.

At the start of second round Lauzon looked the slower of the two before Sotiropoulos shot for and completed a take down.

From there it was elementary as the Brazilian jiu-jitsu black belt effectively transitioned to side control before synching up the Kimura.

After the fight Sotiropoulos expressed his desire to one day fight for the lightweight belt.

"I weathered the storm and I knew I'd find my range," Sotiropoulos said confidently after the fight from Auburn Hills, Michigan.

"This is for you guys in Australia. I'm gonna see you guys Feb. 27 down under," he added, referring the UFC's return trip to Sydney for UFC 127. "I want to face the best. I want to make my case for the belt."

The fight was awarded fight of the night honours with both fighters receiving $80,000 for their efforts. This is Sotiropoulos' second fight of the night after a decision victory against Joe ‘Daddy' Stevenson at UFC 110 in Sydney earlier this year.

In the main event Quinton ‘Rampage' Jackson faced off against Lyoto ‘the Dragon' Machida as both fighters attempted to further their claims for a title shot.

In a closely contested fight that went the full three rounds Jackson was the victor via split decision, the judges scored the fight 29-28, 28-29 and 29-28.

Jackson was the aggressor for two and a half rounds, repeatedly attempting take downs, before a late flurry from Machida broke the momentum. This aggression by Jackson was seen to be the difference in a fight that was more a tactical bout than the promised slug fest.

Jackson was shocked after being awarded the victory but did agree that it was he who pushed the action earlier in the fight.

"I think that's the only thing that earned me the decision, I pushed the action and I think that's what the judge's saw" Jackson said.

"Machida whupped my (butt) in there," Jackson said before adding. "He did a great job. I didn't do what I wanted to do. Even though I don't want to, I have to give him a rematch."

B. J. Penn and Matt Hughes faced off for the third time after their first two matches were shared one-a-piece.

The first two fights were highly anticipated encounters and the third was no difference as the excitement inside the Palace was at fever pitch. This excitement however was short lived as a flurry of punches by Penn, 27 seconds into the fight, sent Hughes to the canvas, before Penn swarmed and finished the former welterweight champion.

Penn was unable to control his emotions as he ran out of the Octagon, hands in the air, before being coaxed back into cage by his corner.

Hughes was dejected as he spoke to UFC colour commentator, Joe Rogan, after the fight.

"When he hit me, I thought it was a knee or a kick," Hughes said. "It wasn't a clip. He hit me hard."

"I trained really hard for this fight. It was a strong camp and I did everything right but it (the loss) is disappointing."

In the other light heavyweight bout Phil Davis pulled off a submission of the night victory over Tim Boetsch, utilising a modified kimura that Joe Rogan later dubbed "the Mr Wonderful."

Davis found it difficult in the first round to find his range as Boetsch successfully used his jab and hook to keep his opponent at bay. Boetsch was also able to keep the fight standing as Davis was unable to secure a take down due to his opponent's strong take down defence.

In the second round it was much of the same before Davis was eventually able to get the take down and pass into side control. From this position Davis isolated the left arm of Boetsch and repeatedly jerked it behind his opponent back with one hand. Davis then passed his other hand under the back of Boetsch to finish his modified kimura.

Davis later said that he practises the move in training and was confident that he would be able to finish the fight with it.

"I tap guys with it all the time in training and I wanted to use it here and it worked," Davis said. "Whenever I see an arm outstretched like that I go for it and I was just lucky that it worked."

In the last fight on the main card Maiquel Falcao grounded out a decision victory over Gerald Harris to the displeasure of the Michigan crowd.

Falcao dominated the fight for two rounds before using the last round to dodge, stall and run from his opponent. Falcao continued to run from his opponent as the crowd grew restless and urged the fighters to engage with each other. Instead the fight ended the way it started with each fighter metres apart.

Bonus awards were given for fight of the night, submission of the night and knockout of the night. Each fighter who was awarded a bonus received $80,000

Fight of the night: George Sotiropoulos vs Joe Lauzon

Knockout of the night: B. J. Penn

Submission of the night: Phil Davis