The American was beaten 6-4, 6-7, (2-7), 7-5 by Wang Qiang, bringing to an end her quest for a record-equaling 24th Grand Slam title.
She currently has 23, while Margaret Court is one ahead.
Qiang took the first set comfortably at the Rod Laver Arena, and could have had the match wrapped up in straight sets had it not been for an inspired turnaround by Williams at match point down in the second.
But Qiang wasn’t to be denied a memorable victory, breaking Williams’ serve in the final game of the last set to secure herself a place in the fourth round for the first time in her career.
Asked if defeat stings like it used to, Williams told reporters: “I’m a better actress as I always say, now. I’m no happier than I was 10 years ago.
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SOURCE: Business Insider, Barnaby Lane