The 11-time champion's loss ended a series of 25 consecutive sets won on his favourite clay as Fognini set up a final showdown against Serbian Dusan Lajovic.
Britain's Cameron Norrie stunned world number one Carlos Alcaraz to reach the third round of the Paris Masters.
Shapovalov, who turned 20, was coming off a spectacular run to the Miami Open semi-finals but struggled to rediscover his service rhythm as he finished with 10 double faults in his first clay court match of the season.
Andrey Rublev moved into his third Masters final after fighting back from a set down in Monte Carlo to beat American Taylor Fritz 5-7, 6-1, 6-3 on Saturday to set up a showdown with Danish teenager Holger Rune.
India's Sumit Nagal becomes 1st Indian to win match at Masters on clay since 1990!
Former world number one Marat Safin of Russia has been granted a wildcard for the Monte Carlo Masters.
Rohan Bopanna and his partner Pablo Cuevas knocked out fifth seeds Raven Klaasen and Rajeev Ram after a three-set battle to progress to the quarterfinals of the ATP Monte Carlo Masters.
Former world number one Djokovic saved four match points but cracked under his opponent's tremendous pressure on the fifth as Goffin set up a last-four meeting with either clay court king Rafael Nadal or Argentine Diego Schwartzman.
Defending champion Stanislas Wawrinka and compatriot Roger Federer suffered contrasting third round defeats at the Monte Carlo Masters on Thursday.
Czech Republic's Jiri Vesely pulled off a huge upset at the Monte Carlo Masters after knocking out defending champion and World No 1 Novak Djokovic at Roquebrune-Cap-Martin, France, on Wednesday.
The 31-year-old triumphed despite suffering from an apparent muscle problem to became the lowest seeded player, at 13, to claim the title since Gustavo Kuerten in 1999.
World number one Rafael Nadal reached the third round of the Monte Carlo Masters, although his easy-looking 6-2, 6-3 win masked a rusty performance against Argentine Juan Ignacio Chela on Wednesday. Newly-wed Roger Federer, who could face Nadal for a fourth consecutive final at the Monte Carlo Country Club, eased past Italian Andreas Seppi 6-4, 6-4.
'I have no idea what's happening right now, I'm not in a dream, it's just crazy. I'm just so happy with my performance these past two weeks.'
Rafael Nadal won a fourth consecutive Monte Carlo Masters title with a 7-5, 7-5 victory over world number one Roger Federer on Sunday.
hampion Rafael Nadal and top-ranked Novak Djokovic turned in impressive displays to reach the Monte Carlo Masters quarter-finals on Thursday. Nadal, chasing a record-extending 12th Monte Carlo title, broke Grigor Dimitrov's serve on four occasions to defeat the Bulgarian 6-4 6-1.
The Argentine clay specialist thrashed Germany's Rainer Schuettler 6-2, 6-1, 6-3 in the Monte Carlo Masters final.
Former world number one Novak Djokovic showed signs of rediscovering his form with a dominant 6-0, 6-1 victory over Dusan Lajovic in the opening round of the Monte Carlo Masters.
The Spanish teenager swept aside defending champion Guillermo Coria 6-3, 6-1, 0-6, 7-5 to win the Monte Carlo Masters.
Seventh seed Wawrinka of Switzerland set up a third-round meeting with Bulgarian ninth seed Grigor Dimitrov after seeing off Argentine Juan Monaco 6-4, 6-1.
World number two Novak Djokovic, unbeaten this year, said on Friday he was pulling out of next week's Monte Carlo Masters due to a knee injury.
Defending champion Rafael Nadal thrashed Austrian fifth seed Dominic Thiem 6-0, 6-2 to reach the semi-finals of the Monte Carlo Masters for a record 14th time on Friday.
Former World No 1 Roger Federer returned from a 10-week layoff with a 6-3, 6-4 second-round victory against Spain's Guillermo Garcia Lopez at the Monte Carlo Masters on Tuesday.
There were glimpses of the formidable Rafa Nadal as the eight-times champions swept aside French Open champion Stan Wawrinka 6-1, 6-4 on Friday to reach the Monte Carlo Master semi-finals.
Carlos Alcaraz heads to Paris for his French Open title defence having laid down a marker with his victory over world number one Jannik Sinner in Rome
Fourth seeds Mahesh Bhupathi and Mark Knowles of Bahamas stormed into the semi-finals of the men's doubles in the Monte Carlo Masters Series, beating fifth seeds Simon Aspelin of Sweden and Julian Knowles of Austria 6-2, 6-3 in the quarter-finals.
Djokovic, 38, is winless on clay this year after exiting the Monte Carlo Masters and Madrid Open with straight-sets losses last month, and his form is a concern heading into Roland Garros, which kicks off on Sunday.
Rafael Nadal left no doubt that he would be the overwhelming favourite at next month's French Open after crushing fellow Spaniard David Ferrer 6-2, 6-3 in the Monte Carlo Masters semi-finals on Saturday.
Rafael Nadal beat Novak Djokovic 6-3, 2-6, 6-1 in the Monte Carlo Masters final on Sunday to become the first man to win the claycourt tournament five times in succession.
World number one Rafael Nadal laboured into the third round of the Monte Carlo Masters while Roger Federer had a smooth start to his campaign on Wednesday.
The Indo-Australian pair beat Argentine duo David Nalbandian and Sebastian Prieto 6-4, 6-3 in the first round.
Mahesh Bhupathi and Mark Knowles entered the final of the Monte Carlo Masters with a 6-0, 7-5 win over Jeff Coetzee and Wesley Moodie.
World number one Roger Federer came from a set down to outclass Argentine sixth seed David Nalbandian 5-7, 6-2, 6-2 and book his place in the Monte Carlo Masters last four on Friday. The Swiss top seed, who hit a string of outstanding winners in a first-rate match, next meets either Australian Open champion Novak Djokovic of Serbia or unheralded American Sam Querrey.
Unseeded Alejandro Tabilo beat twice champion Novak Djokovic 6-3, 6-4 in the second round of the Monte Carlo Masters on Wednesday to maintain a remarkable 100 percent record win record over the 24-times major winner.
Novak Djokovic will be hoping his gamble to play in the Monte Carlo Masters does not leave his claycourt season going bust after he decided to test his injured ankle in the glamorous principality.
Rafael Nadal calmly continued his bid for a ninth consecutive crown at the Monte Carlo Masters with a 6-2, 6-4 third-round victory over Philipp Kohlschreiber of Germany on Thursday.
Murray, who suffered an elbow injury in March and made his return from a five-week layoff on Wednesday after a first-round bye, won the opening set in 48 minutes before losing concentration.
Bhupathi pairing Fernando Gonzalez defeated Dominik Hrbaty and Marat Safin 6-3, 6-3 to enter the second round.
Indian tennis ace Rohan Bopanna and his Romanian partner Florin Mergea knocked out of the Monte Carlo Masters after suffering straight-sets defeat in the quarter-final clash of the men's doubles event on Friday.
Rafael Nadal claimed a record-extending 10th Monte Carlo Masters title as he geared up for his beloved French Open with a 6-1, 6-3 victory against fellow Spaniard Albert Ramos on Sunday.