Ivanovic, the fifth seed, was dumped by qualifier Lucie Hradecka in the opening round of the year's first Grand Slam at Melbourne Park, which often proves a minefield for players short of match practice after the off-season.
Fellow seeds Angelique Kerber (9), Svetlana Kuznetsova (27) and Sabine Lisicki (28) were also among the day-one casualties, while China's Peng Shuai (21) and Carla Suarez Navarro (17) negotiated their way through.
Ivanovic's humiliating 1-6, 6-3, 6-2 loss to Hradecka of the Czech Republic was a disaster for the Serb, who won her only major at the French Open in 2008.
She was hoping to re-establish her Grand Slam credentials at the Australian Open, where she enjoys huge popularity among the home fans.
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"It's really disappointing. It's probably the worst thing could happen," she said, admitting she felt "lost" on centre court as world number 142 Hradecka recovered from a woeful start to outclass a player 137 places above her.
"I still don't believe that it's true. Probably in a couple of hours I'll know that I am in the second round in the Australian Open and I beat Ana... I'm still smiling," she told reporters.