Defending champion Roger Federer extended his winning streak in Hamburg to 19 matches with a straight-sets victory over Sweden's Robin Soderling.
Federer advanced to the quarter-finals in the northern German city with a 6-3 6-2 victory over Soderling.
He has claimed the championship in four of the past six years.
In addition to last year's triumph, when he ended Rafael Nadal's record 81-match claycourt winning streak in the final, Federer has also claimed the title in 2002, 2004 and 2005.
The world No.1, who skipped the 2006 edition of the tournament, has won 27 of his last 28 matches here since 2002.
Nadal, the second seed, also advanced to the round of eight after defeating 15th-seeded Andy Murray 6-3 6-2.
The 21-year-old Spaniard is playing in his first event since a rare claycourt loss last week in Rome, where countryman Juan Carlos Ferrero pulled off a 7-5 6-1 upset.
Nadal, who was hindered by a nasty blister on his right foot during the loss, had won 103 of his past 104 matches on clay prior to the setback.
Third seed Novak Djokovic, who could overtake Nadal as the world No.2 if things go in his favour this week, reached the quarters with a 7-6 (7-3) 6-3 victory over unseeded Ivo Karlovic.
The reigning Australian Open champion will face Albert Montanes, a 6-2 6-1 winner over Janko Tipsarevic.
There was no shortage of upsets as three seeded players tumbled out of the draw, including fourth seed Nikolay Davydenko.
The Russian No.1 was beaten by Germany's Nicolas Kiefer, who received plenty of support from the partisan crowd during his 7-5 6-3 victory.
Making his 10th appearance in Hamburg, Kiefer has never gone this deep into the draw and is the first German to reach the quarter-finals since Tommy Haas in 1999.
His win set up an unlikely quarter-final match with unseeded Italian Andreas Seppi, who shocked 12th-seeded Juan Monaco 6-0 6-3 earlier in the day.
In another surprise, Spaniard Fernando Verdasco continued a strong tournament by ousting countryman and fifth seed David Ferrer 7-6 (7-4) 6-2.
Verdasco, who will face Federer in the quarters, also upset 10th seed Mikhail Youzhny in the opening round.
Third Round Results from Hamburg Masters, Germany
1-Roger Federer (Switzerland) def. Robin Soderling (Sweden) 6-3 6-2
2-Rafael Nadal (Spain) def. 15-Andy Murray (Great Britain) 6-3 6-2
3-Novak Djokovic (Serbia) def. Ivo Karlovic (Croatia) 7-6 (7-3) 6-3
Nicolas Kiefer (Germany) d 4-Nikolay Davydenko (Russia) 7-5 6-3
Fernando Verdasco (Spain) def. 5-David Ferrer (Spain) 7-6 (7-4) 6-2
11-Carlos Moya (Spain) def. Marat Safin (Russia) 6-2 6-7 (3-7) 6-1
Andreas Seppi (Italy) def. 12-Juan Monaco (Argentina) 6-0 6-3
Albert Montanes (Spain) d Janko Tipsarevic (Serbia) 6-2 6-1