Women's defending champions joins big names on the casualty list after going down to Germany's Sabine Lisicki in an inconsistent fourth-round show.
Wimbledon: Williams and Robson exit but Li Na coasts to last-eight
Lisicki, a Wimbledon semi-finalist in 2011, will play Estonia's Kaia Kanepi for a place in the last four.
The 31-year-old Williams, a 16-time Grand Slam champion, had swept through the first week, dropping just 11 games in her opening three matches to extend her winning run to 34 matches, but she had no answer to Lisicki's big-serve and booming ground-strokes.
"I'm still shaking, I'm so happy", said Lisicki, breaking into tears.
"Serena played a fantastic match. She's such a tough opponent and it's just an amazing feeling to win."
Serena felt she let victory slip away, saying: "I definitely made too many errors, but she was playing with nothing to lose. When you play with such freedom this kind of thing can happen.
"I felt I was on the verge of winning in the third set but I was physically unable to hold serve after that."
If Williams struggled, Chinese sixth seed Li Na had no such problems as she raced into the Wimbledon quarter-finals with a 6-2, 6-0 demolition of Italian 11th seed Roberta Vinci.
In contrast to her topsy-turvy two previous matches, which both went to three sets, the 2011 French Open champion took just 55 minutes to get past her fourth round opponent.
In reaching the last eight, Li has matched her Wimbledon best, having made the quarter-finals in 2006 and 2010.
The 31-year-old will face either Polish fourth seed Agnieszka Radwanska or Bulgarian world number 72 Tsvetana Pironkova on Tuesday for a place in the semi-finals.
Petra Kvitova flew the flag for former Wimbledon champions when she became the first to make the quarter-finals with a 7-6, 6-3 win over doughty Spaniard Carla Suarez Navarro.
After the high-profile departures of Rafael Nadal, Roger Federer and Maria Sharapova in the first week, Kvitova sneaked through on a blustery Court Three before the main fourth-round action had started on the big show courts.
It was not all plain sailing for the 2011 champion, who has yet to rediscover the consistency that took her to world number two 20 months ago.
"I was pretty nervous today...I didn't play my best, especially in the first set. But it's important to win the last point which was what I did," Kvitova told a news conference.
Suarez Navarro, 24, the last Spanish woman in the draw, harried her from the baseline, moving fast, returning early and chasing down the Czech's booming groundstrokes.
Eighth seed Kvitova, 23, broke the Spaniard's serve and should have finished off the first set in the 12th game but nervy shots allowed Suarez Navarro to break back, using her rare and elegant single-handed backhand to stinging effect.
With big names like the injured Victoria Azarenka and former world number one Caroline Wozniacki gone, Kvitova was clearly feeling the weight of expectation.
"Everybody is talking about that I'm the highest seeded player in my half, I'm supposed to be already in the final. It's not really easy to hear that," she said.
But the statuesque Czech's power eventually proved too much for her more diminutive opponent and she pressured Suarez Navarro into slapping a forehand into the net to take the set 7-5 in the tiebreak.
Emerging victorious from a tight tiebreak appeared to energise Kvitova and she bowled through the second set in 34 minutes, using her big left-handed serve, long reach and strength to quell her Spanish opponent.
Meanwhile, Britain's dreams of a first woman in the Wimbledon quarter-finals for 29 years were shattered on Monday when tearful home favourite Laura Robson was knocked out in the fourth round by Estonia's Kaia Kanepi.
In a closely-fought match, Kanepi just had the edge in the crucial points to win 7-6 (8/6), 7-5.
In the men's draw, David Ferrer wore down Croatia's Ivan Dodig with his high-energy scrambling to move into the Wimbledon quarter-finals with a 6-7 (3), 7-6 (6), 6-1, 6-1 win on Monday.
The Spanish fourth seed arrived 10 minutes late on Court Two and was slow to impose himself on the match, losing the first set in a tiebreak before winning the second the same way.
Dodig, ranked 49th in the world, could not maintain his consistency as the match wore on and his serve, which had been such a weapon in the early stages, faltered to allow Ferrer to turn the screw.
After failing to win a point on the Dodig serve for four successive games in the second set, Ferrer broke three times in the third and twice in the fourth to wrap it up.
UNFORCED ERRORS DOOM ROBSON
Laura Robson struggled to fight back the tears as she squandered a big chance to make history at Wimbledon.
After three impressive victories last week, Robson had an opportunity to become the first British woman in 29 years to reach the quarter-finals of a grand slam, but she crumbled at key stages yesterday, losing 7-6, 7-5 to world No 46 Kaia Kanepi.
The 19-year-old Briton was a break up in the first set, and also led in the tie-break, but she could not see the match out.
A series of unforced errors, mainly involving her forehand, and a lack of nerve towards the end of the first set were the main factors in her defeat.
Her disappointment was clear as she trudged off Court One, failing to acknowledge her supporters as she had during the rest of the tournament.
"That was because I lost. I was just trying not to cry," Robson said afterwards. "I'm really, really disappointed. I had my chances and I just didn't take them."
Robson has largely enjoyed a "crazy" nine-day period during which she truly established herself as the darling of British women's tennis.
Victory over Maria Kirilenko in the first round made her the first home woman to beat a top-10 player at Wimbledon for 15 years and her progression to the last 16 means she will be the first British female to crack the top 30 since 1987 when the rankings are updated next week.
Kanepi, who will play Serena Williams's conqueror Sabine Lisicki in the last eight, was expecting Court One to be an intimidating place because her opponent was playing on home soil.
The support, however, did not match expectations for the 28-year-old Estonian.
"I think the crowd wasn't that bad actually," Kanepi told the BBC. "When she won a point it was a bit louder than normal but they didn't clap when I double-faulted or anything. I think it was really good."
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