Anna Kournikova got a rough reception in Moscow
Kournikova, who has missed most of the season with a foot injury, was beaten 6-2 1-6 6-2 by 17-year-old compatriot Galina Fokina on Tuesday.
There was another surprise in the men's singles as third seed Roger Federer of Switzerland lost 6-3 1-6 7-6 to Germany's Nicolas Kiefer.
World number 10 Federer made 43 unforced errors before succumbing to Kiefer on the second match point.
Fokina, ranked 251st in the world, needed just 75 minutes to beat Kournikova, who was whistled off the court.
"I think lately many Russians don't seem to like Anna that much, therefore I felt like I had more fan support than her and I didn't feel nervous playing on centre court," said Fokina.
It was Fokina's first ever win on the WTA tour, while Kournikova has lost all her matches following her comeback.
"I've lost three matches since I had my injury in February, and all of those came in three sets," said Kournikova.
"I'm still trying to regain my physical fitness and mental strength, so my game is bound to have its ups and downs.
"People talk a lot about me dropping out of the top 10 or even the top 20, but I honestly don't really care what my ranking is.
"All I can do is continue playing tournaments, then start getting ready for next year."
Fokina will now face fifth-seeded Jelena Dokic after the Yugoslav overcame fellow teenager Russia's Lina Krasnorutskaya 6-3 5-7 7-5.
Eighth-seeded Elena Dementieva beat fellow Russian Elena Bovina 6-3 6-4 and now takes on another qualifier, American Alexandra Stevenson, who eliminated Anne Kremer of Luxembourg 6-2 6-3.
In the men's tournament, top seed and defending champion Yevgeny Kafelnikov easily beat teenage compatriot Mikhail Yuzhny 6-3 6-3.
In other matches, fifth seed Thomas Johansson beat Davide Sanguinetti 6-2 6-3 and Thomas Enqvist overcame Andrea Gaudenzi 6-7 7-6 6-1.
And Magnus Gustafsson beat eighth seed Nicolas Escude 6-4 5-7 6-4.