Somdev, who is ranked 78 places above the Reid at 135, frittered away a good start to lose 6-7 (4) 6-4 16-18 in his opening round of the only Grass Court Grand Slam of the season.
Somdev had a good lead in the first set and had a match point in the ninth game of the third set but allowed Reid to comeback every time and went on to lose the match.
Somdev's defeat means that there won't be any Indian in the men's singles draw of the Wimbledon this year.
It was first meeting between Somdev, who was seeded 22nd in the qualifiers and unseeded Reid.
Somdev had taken a 3-1 lead after an early break but dropped serve in the fifth game to allow the Australian make it an even affair.
The set went with serve from that point and it took a tie-breaker to finish the first set. Reid took control of the tie-breaker by racing to a 5-1 lead and comfortably pocketed a one-set lead.