Spanish eighth seed Nadal, whose 14 Slam titles include the 2010 and 2013 US Open crowns, fell victim to 32nd-seeded Italian Fabio Fognini 3-6, 4-6, 6-4, 6-3, 6-4 at Arthur Ashe Stadium yesterday.
Nadal had not lost so early on the New York hardcourts since a third-round ouster in 2005 by American James Blake. The 29-year-old left-hander had been 151-0 in Slam matches when leading by two sets.
Fognini imposed seven consecutive service breaks upon Nadal in the fourth and fifth sets, smacking 70 winners past the iconic star in a fantastic effort.
"I can't describe how happy I am," Fognini said. "It was very tough. To do it against Rafa, two sets down. It was an incredible match."
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Fognini, 32, booked a last-16 date with 18th-seeded Spaniard Feliciano Lopez, who eliminated Canadian 10th seed Milos Raonic 6-2, 7-6 (7/4), 6-3.
It was Fognini's first win in 18 tries on hardcourt against a top-10 rival and made him the first Italian in the US Open last 16 since Davide Sanguinetti in 2005.
Women's world number one Williams, meanwhile, battled through mistakes and the tension of her quest for tennis history.
Williams fought back to defeat 101st-ranked US compatriot Bethanie Mattek-Sands 3-6, 7-5, 6-0 at Arthur Ashe Stadium and needs only four more triumphs to complete the first calendar Slam since Steffi Graf in 1988.
The 33-year-old American went to three sets for the 10th time in 24 Grand Slam matches this year and stayed perfect, eight of those fightbacks after first-set defeats.
"I'm not trying to live on the edge," Williams said. "I don't think I came out too slow. I think Bethanie came out really well. I had to adapt to her game and I finally got some rhythm going toward the end of the second set.