The defeat to Stosur is Serena's first in nine matches
Top seed Serena Williams crashed to a shock 2-6 6-3 2-6 quarter-final defeat at the hands of Australian Samantha Stosur in the Bank of the West Classic.
The Wimbledon champion failed to convert nine break points against an opponent ranked 18 places below her.
"She had a lot of lucky shots; she's a good framer but it's obviously all talent," said Williams.
Williams' sister Venus did win in California, beating Maria Sharapova 6-2 6-2 to reach the semi-finals.
Stosur, 25, has won 22 WTA doubles titles but no singles crown during her career and reached the semi-finals of the French Open this year.
"It's one of the biggest, if not the biggest win of my career," said Stosur of her victory over an opponent who beat her in three sets at the Medibank International in Sydney in January.
Serena praised her opponent afterwards and added: "She played well and didn't do anything bad. She went for broke and struck all her balls as hard as she could. She never lets you get into a rhythm."
Stosur will now play Marion Bartoli in the semi-finals after the Frenchwoman scraped past fourth seed Jelena Jankovic 3-6 7-6 (7-3) 6-3.
Venus Williams, the number two seed, hit 14 winners, including three aces, against Sharapova, who produced 30 unforced errors in her loss.
"I can't complain too much," stated Venus. "I could have played a little more consistently but I just really want to keep elevating my game through the week."
Sharapova, who returned to the court earlier this year after a nine-month lay-off following shoulder surgery, conceded that Venus had been the better player.
"Against Venus you have to go more for your shots because you don't expect her to make the errors," she commented.
"She did many things a lot better than I did. My goal was to create my own opportunities and I didn't do that."
Venus faces a semi-final showdown with third-seeded Elena Dementieva, who beat Slovakian Daniela Hantuchova 6-2 6-4.