Khan arrived in Saudi Arabia on a mission to make a massive statement in his Middle East debut which would lure the eight-time world champion Pacquiao into a fight with him in the desert.
Australian Dib was originally on the undercard in Jeddah but was promoted to the main event after Khan's original opponent, Neeraj Goyat, was forced to withdraw due to injuries sustained in a car crash.
Dib insisted that he was using Andy Ruiz Jr as his inspiration after the heavyweight underdog shocked the world by defeating heavyweight king Anthony Joshua on only a few weeks notice.
After an amazing build-up at the packed King Abdullah Sports City, which included performances by American superstar rappers Tyga and Rick Ross, the electric atmosphere was cranked up during the singing of the Saudi national anthem.
Khan stormed into action early and landed with a pair of hard left hooks as he looked to use his size and reach to his advantage.
In the second round he landed a perfect left hook to drop Dib heavily. Dib bravely rose at the count of eight and managed to hang on until the end of the round but Khan dished out more heavy punishment in the third round.
It was all over in 1:06 of the fourth round after Dib was floored for the second time and the towel was thrown in from the Dib's corner.
Khan will now watch Pacquiao take on Keith Thurman next weekend in Las Vegas, knowing he has kept up his side of the bargain in their potential deal.
Khan said: "We want the Manny Pacquiao fight. Let's hope he comes to Saudi Arabia. I think whenever I fight I always make it very exciting the people here love a fight.
"I felt very comfortable in there, obviously having a new trainer Bones Adams, we had to work on a strategy. I wanted to slow down a little bit and I was seeing everything and making sure I was picking the right shots."
( With inputs from IANS )