French Open: Sunday 25 May to Sunday 8 June
Coverage: BBC TV, BBCi, Radio 5 Live and the BBC Sport website.
Williams' defeat equals her worst performance at Roland Garros
Sisters Venus and Serena Williams both crashed out of the French Open after suffering surprise third-round defeats.
World number five Serena, the 2002 champion, lost 6-4 6-4 to Katarina Srebotnik of Slovenia.
Then elder sister Venus, the eighth seed, suffered a 7-5 6-3 loss to Italian Flavia Penetta.
Top seed Maria Sharapova struggled against American qualifier Bethanie Mattek before winning her second round match 6-2 3-6 6-2.
Serena was the only former champion in the women's draw but she looked ill at ease on Court Suzanne Lenglen as Srebotnik, the 27th seed, earned her first victory over the American in four meetings.
Only once before, in 1999, had Williams failed to reach the fourth round in seven previous visits to Paris.
"I just felt like I missed a lot of easy shots and a lot of key points that I felt like could have turned the match around. I wasn't able to capitalise on a lot of that," she said.
"I knew it was going to be a tough match, but what can I say? She just played unbelievable."
Srebotnik broke in the opening game and then again to take a 5-3 lead.
Williams saved two set points at 5-4 but netted a backhand to hand the Slovenian the first set.
The American looked sharper in the second but Srebotnik displayed impressive resolve and, after breaking in game nine, sealed the triumph on her third match point when Williams sent a forehand wide.
Srebotnik now faces Swiss 10th seed Patty Schnyder, who beat France's Emilie Loit 7-6 (7-4) 5-7 6-2.
Although Venus started confidently against Pennetta, breaking in the second game, the American eighth seed dropped serve four times in the opening set, the last time in the 11th game with Pennetta following up to take the opening set.
The Italian continued to take advantage of her opponent's unforced errors to start the second set with a break, and she broke the Williams serve a second time in the decisive game, sealing victory after 85 minutes with a forehand winner.
Sharapova had begun her match against the American qualifier on Thursday night and won the first set before darkness stopped play.
But Mattek was in confident mood when play resumed on Friday and, with Sharapova clearly out of sorts, hit back to take the second set.
The Russian was lacking consistency with her serve but hard work put her in control in the decider before more unforced errors brought Mattek back into things.
Sharapova finally steadied herself, however, and broke Mattek for a third time in the final set to seal victory in two hours and three minutes.
"I'm not a clay court specialist that's going to stand 10 feet behind the baseline and retrieve balls back," said Sharapova, who needs a win in Paris to complete a career grand slam.
Ivanovic looked ill at ease early on before easing into round four
"I'm going to stick to my guns and do what I do best. I'm also going to play patiently if I want to win matches, especially against physically challenging players that hit 10 balls back.
"If I feel tired then they're feeling 20 times more tired, because they're the one doing all the running."
Second seed Ana Ivanovic struggled early on against teenage Dane Caroline Wozniacki before rallying to reach round four with a 6-4 6-1 win.
The world number two will play Petra Cetkovska for a spot in the last eight.
Cetkovska, who eased past fellow Czech Iveta Benesova 6-3 6-3, will be buoyed by the way Ivanovic struggled to find any sort of rhythm in an error-strewn first set.
Poland's Agnieszka Radwanska, the 14th seed, is also through to the fourth round after beating another Frenchwoman, 19th seed Alize Cornet.
And Russian 11th seed Vera Zvonareva won her second round match 6-2 6-4 against Cornet's compatriot, Stephanie Cohen-Aloro.
Third seed Jelena Jankovic was leading 28th seed Dominika Cibulkova 7-5 4-2 when darkness forced their match to be suspended.