World number one Williams, seeking a record seventh US Open title and 23rd Grand Slam crown, fired 18 aces en route to the triumph last night, which set up a meeting with first-time Grand Slam semi-finalist Karolina Pliskova for a place in Saturday's championship match.
But she made her task against the 2014 French Open finalist harder with 43 unforced errors and Halep, firing on all cylinders from the baseline took advantage.
The Romanian became the first player in the tournament to break Williams's serve, and the first to take a set off the top seed.
"I knew I could play a lot better," Williams said of her frustration in a second set that lasted 65 minutes. "She kept going for her shots -- she stepped it up."
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Williams's semi-final against Pliskova promises more fireworks. The 10th-seeded Czech leads the WTA tour in aces this year.
After surviving a match point en route to a fourth-round victory over Venus Williams, Pliskova beat 18-year-old Croatian Ana Konjuh 6-2, 6-2.
her opportunity.
With a quick break under her belt in the opening game she was able to swing freely and needed just 57 minutes to subdue Konjuh, who upset fourth-seeded Agnieszka Radwanska in the fourth round.
"I think it was the serve," said Pliskova, who finished off the match with two of her three aces. "My serve was very good today."
Konjuh, the 18-year-old who is projected to rise from 92nd in the world to 51, couldn't be disappointed with her fortnight's work.
"I cannot be sad after all of this," she said. "When I came here I could only imagine playing the quarters. I think it's been a great tournament."
She beat Angelique Kerber in the final to deny the German world number two's bid to supplant Serena atop the world rankings.
Kerber, who booked her semi-final slot on Tuesday with a 7-5, 6-0 victory over 2015 finalist Roberta Vinci, can still nudge Serena from the summit.
No matter the outcome of Kerber's semi-final clash with former world number one Caroline Wozniacki, Serena must now reach the final to stretch her reign to a record-breaking 187 weeks.