Tim Henman's Madrid Masters challenge ended at the first hurdle after a 6-7 (4-7) 3-6 defeat by American Mardy Fish.
Henman's loss means he has never won at the Rockodromo Arena, having exited at the same stage in last year's inaugural event.
The British number one was looking to build on an encouraging semi-final run at last week's CA Trophy in Vienna but Fish proved too strong.
"It's frustrating, but there are aspects I can work on in Basel next week," said Henman.
"There's nothing wrong with me and nothing wrong with my game. I lost today but I've got two more weeks to build on it.
"This has been a testing year of ups and downs - but you learn more through the downs.
"I've come through physically (after shoulder surgery) and feel my game is ready to move in right direction."
Henman began the match in impressive form and though he was broken at 5-4 in the first set, he broke back immediately to force a tiebreak.
However, he delivered an ill-timed double fault at 2-2 and Fish, who is world-ranked five places higher than Henman, pounced to take the first set.
A sloppy game from Henman at 1-2 in the second set sealed his fate, and though a nervous Fish double-faulted three times as he attempted to serve out the win, the Briton could not capitalise.