Venus Williams fell at the first hurdle in the Kremlin Cup as the sixth seed slumped to 6-4 2-6 6-4 loss to Flavia Pennetta.
The Italian has now won three successive matches against the former world number one and seven-time grand slam champion.
The 18th-ranked Pennetta will be hoping to move a step closer to a third title of the season when she faces Russian wild card Ekaterina Makarova in the second round.
The defeat marked only the second time in 12 events this season that Williams has been eliminated in the first round.
The 37-time champion made a statement at Wimbledon this summer, winning the event for the second season in a row and fifth time overall.
However, that is Williams' only title in 2008.
The last time the 28-year-old failed to win more than one title in a season was in 1997, when she was just beginning to emerge.
Williams' defeat was good news for world number one Jelena Jankovic, who is the top seed in Moscow and gunning for her third title in as many events.
The Serb faced a potential showdown with Williams in the quarter-finals, but will not have to face a seeded player now until the last four at the earliest.
The bottom of the draw produced no shocks as fifth seed Svetlana Kuznetsova of Russia advanced to the second round along with seventh-seeded countrywoman Vera Zvonareva.
Kuznetsova beat China's Na Li 6-4 7-5 to set up a second-round match with Italian qualifier Sara Errani, who ran out a 1-6 6-4 6-3 winner over Victoria Azarenka of Belarus.
Zvonareva, meanwhile, topped Maria Kirilenko 6-4 6-4 in an all-Russian clash to book a second-round meeting with Slovakia's Daniela Hantuchova.
Also progressing was Slovenian qualifier Katarina Srebotnik, who will face defending champion and number three seed Elena Dementieva next.