Federer went into the match with a 3-0 record against Montanes
World number one Roger Federer suffered another blow to his French Open preparation with a surprise defeat by Albert Montanes at the Estoril Open.
The 16-time Grand Slam champion lost 6-2 7-6 (7-5) to defending champion Montanes, Spain's world number 34.
Federer was playing at the relatively minor event to gain some clay-court practice after losing his opening match at the Rome Masters last month.
The reigning French Open champion now heads to next week's Madrid Open.
"I'm not worried, the French is still too far away," Federer said of the clay Grand Slam, which begins on 23 May.
"This stuff happens. My goal is not to win 12 events in a year any more. It's to win big events like Grand Slams, Masters 1000s and the year-end championships.
I tried to play from the back of the court, but this is not the tennis I wanted to show for sure
"It's a disappointing match to lose. I just couldn't get off to a good start and I struggled the whole way through."
Federer, 28, won the Estoril tournament on his one previous appearance, beating Nikolay Davydenko in the 2008 final.
He had played Montanes three times before, winning all three encounters for the loss of just one set including a victory on clay at the 2008 French Open.
"I tried to play from the back of the court but this is not the tennis I wanted to show for sure," he added.
"In the second set I had some better moments but I have to pick up my game."
Federer is now looking forward to playing in the high altitude of Madrid that produces the faster conditions which helped him beat Rafael Nadal in last year's final.
"I'm happy, at I least got three matches this week, though I would have liked to get one more," he said. "Alberto played a good match.
"He's a clay-courter and knows his stuff. He didn't give me much and I struggled from the beginning."
The second semi-final saw Frederico Gil become the first Portuguese to reach the Estoril final with a 6-2 5-7 6-3 win over Spaniard Guillermo Garcia-Lopez.
In the women's final, Latvia's Anastasija Sevastova beat Arantxa Parra Santonja of Spain 6-2 7-5.