Pennetta has a good record against the world number eight
Venus Williams lost in three sets to Italy's Flavia Pennetta in the first round of the Kremlin Cup in Moscow.
World number 18 Pennetta beat the sixth seed 6-4 2-6 6-4 and now has a 3-1 winning record over Williams.
"I just had a day where I could not control my game," said Williams. "She played well."
In the men's singles, top seed Nikolay Davydenko began his bid for a third successive title with a 6-1 7-5 win over Frenchman Florent Serra.
Davydenko, the world number five, is hoping to secure a place in the season-ending Masters Cup in Shanghai.
French pride suffered again at Moscow's Olympic sports complex when Uzbek qualifier Denis Istomin upset sixth seed Michael Llodra 7-6 6-3.
In the women's draw, fifth seed Svetlana Kuznetsova again avenged her Olympic defeat by Li Na by beating the Chinese player 6-4 7-5.
Li shocked the Russian in the first round of the Beijing Olympics in August, though Kuznetsova beat her in the Pan Pacific Open the following month.
The top four seeds, Jelena Jankovic, Dinara Safina, Elena Dementieva and Ana Ivanovic, have byes into the second round of the $2.3m (£1.3m) indoor tournament.
The women's field is the strongest in the Kremlin Cup's 19-year history, with only world number two Serena Williams and number six Maria Sharapova among the leading players absent because of injury.