Nadia Petrova pulled off a stunning 6-3, 7-5 victory over the world number two and top seed.
The victory earned the Belgian a quarter-final meeting with Russia's Dinara Safina at the Diamond Games.
The US Open champion beat the world number one in a hard-fought Champions Challenge final in Hong Kong.
Clijsters and Xavier Malisse gave Belgium a 2-0 winning lead over Slovakia in the Hopman Cup.
Unlike previous years when there seemed to be only a small handful of genuine contenders, there are as many as a dozen women vying for the crown this season.
Williams's last Grand Slam victory came 18 months ago at Wimbledon, and her form and fitness since returning to the tour after an eight-month layoff have been inconsistent.
The former world number one ruled herself out of next month's Australian Open because of a wrist injury.
The American ace was assured the year-end top spot after world number two Kim Clijsters of Belgium was knocked out at the round robin stage at the WTA Championships.
Defending champion Maria Sharapova was forced to drop a set before beating Patty Schnyder in the season-ending WTA Championships.
The US Open champion will meet Francesca Schiavone in the final of the Belgian Open.
Defending champion Patty Schnyder also reached the last eight by upsetting third seed Amelie Mauresmo 6-2, 6-2.
We bring you best images from week one of the 2019 Australian Open Championships at Melbourne Park
"My body is already giving me a lot of problems," the 22-year-old Belgian said.
Kim Clijsters captured the Rogers Cup with a 7-5, 6-1 victory over fellow Belgian Justine Henin-Hardenne.
The Belgian ace made the semi-finals of the Acura Classic along with Justine Henin-Hardenne and Lindsay Davenport.
Venus Williams bravely fought off five match points to stun third seed Patty Schnyder 2-6, 7-6, 6-2 to enter the final in Stanford
India's Nagal draws world No 128 Bradley Klahn in opener.
Kim Clijsters began her farewell appearance in Miami by beating Akiko Morigami 4-6, 6-0, 6-0 in the second round.
The country's newspapers hailed the French Open final between Justine Henin-Hardenne and Kim Clijsters as a "new day for Belgian sport".
In the semi-finals, Clijsters beat defending champion Svetlana Kuznetsova while Douchevina accounted for Roberta Vinci.
Justine Henin-Hardenne returns to the court where she won her first grand slam on Monday.
The former world number one said she would play in the French Open despite a knee injury.
The world number two she has to give her wrist more time to recover from a recurrent injury.