Top seed Novak Djokovic needed two match points to beat Swiss Stanislas Wawrinka 7-6 (7-5), 6-4 while Roger Federer, rolled over Frenchman Richard Gasquet 6-3, 6-2.
Rafael Nadal went down in frustration as the second seed lost his first match of the season on clay, with Spanish compatriot Fernando Verdasco triumphing 6-3, 3-6, 7-5 on Thursday in the third round of the Madrid Masters.
"I never was in control of the match, I didn't know how to win a point," said Nadal, who intimated he will not show up next year unless the controversial blue clay surface he abhors is modified.
Nadal's perfect record on the dirt for 2012 was marred as Madrid native Verdasco clawed out the opening set to stun multiple Monte Carlo and Barcelona champion Nadal, who, though he dug out the second set, succumbed in the decider.
"Movement is very important for me and I couldn't move.
"I couldn't hit ball the way I wanted. I lost because I deserved to lose."
With the exit of Nadal, Federer now has a chance to return to the ATP number two ranking if he can win the title, according to ATP calculations.
"It was a surprising loss for Rafa," said the Swiss. "But Verdasco is a quality player who should have maybe beaten Nadal in the past.
"Down two breaks in a match on clay you don't expect a guy to come back. But the tournament goes on without Rafa.
"I did well today, playing clean tennis. Maybe I had some unforced errors when I went for shots, but the ball flies here.
"I served well when I had to and played well on big points," he said before facing Spanish fifth seed David Ferrer, who beat compatriot Nicolas Almagro 7-6 (7/5), 3-6, 7-6 (10/8).
Verdasco lost his second set as Nadal found his rhythm, but the 15th-seeded challenger rallied from 1-4 down in the third to work his upset miracle, winning his first match over the king of clay from 14 attempts.
The final set was littered with seven breaks of serve, with a nervous Nadal well off his game and expressing frustration with the surface which has drawn his ire for weeks.
Verdasco applied the pressure in the final game to break Nadal and advance on his second match point, with the winner kissing the surface in gratitude.
"I couldn't close out the match at 5-2. He played better than me," said Nadal, by far the harshest critic of the experimental switch to blue clay.
"The ATP and the tournament can do what they want, I tried my best, I've trained since Thursday. I was as prepared as I could be.
"I was not good enough to adapt my game to this court. If things continue like this, it will be very sad.
"Next year this will be one less event for my calendar."
The devastated number two will need to regroup if he is to regain equilibrium, with next week's Masters 1000 in Rome restoring some normality with a return to classic red clay and sea level altitude.
The Mallorcan now stands 22-1 on clay since losing in the Rome final last year to Djokovic.
Elsewhere, Czech sixth seed Tomas Berdych ended the injury comeback effort of Frenchman Gael Monfils, the number 12, with a comprehensive 6-1, 6-1 victory.
Estoril champion Juan Martin del Potro, the tenth seed, beat Croatian Marin Cilic 6-2, 6-4.
In women's play, Serena Williams staged a recovery at the expense of Caroline Wozniacki as the American reached the quarterfinals 1-6, 6-3, 6-2.
The comeback win in 1hr 42min put Williams into a showdown with second seed Maria Sharapova, who earned her last-eight place when opponent Lucie Safarova withdrew before their match with stomach illness.
Polish fourth seed Agnieszka Radwanska advanced over Italy's Roberta Vinci 7-6 (7/1), 6-4 while Lucie Hradecka beat Elena Makarova of Russia 6-2, 7-6 (7/5).