The former world number one, making her first appearance at Melbourne Park since she won the championship two years ago, became the first major casualty of the tournament when she lost to fellow Russian Maria Kirilenko 7-6, 3-6, 6-4.
Sharapova, unable to defend her title last year because of a shoulder injury, was a shadow of the player who stormed to the 2008 title without dropping a single set, contributing to her own defeat with 66 unforced errors and 11 double faults.
"I just didn't win the match. I certainly had my chances but I didn't execute," Sharapova said.
The match was played indoors after tournament organisers closed the giant roof on the Rod Laver Arena as rain disrupted the first day at Melbourne Park.
The Australian Open often falls victim to extreme heat but it was wind and rain that greeted the players when they arrived on Monday.
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The featured matches went ahead as planned on the centre court and Hisense, which both have retractable roofs, with last year's runner-up, Russia's Dinara Safina, winning her opening match against Magdalena Rybarikova.
SAFINA THROUGH
Safina, who has been troubled by back pain, was also well below her best but unlike Sharapova, she was able to overcome her problems to defeat her Slovakian opponent 6-4, 6-4.
"I had some good moments and bad moments, but overall I'm happy I went through," said Safina.
"It was a solid game by me. I can start to build up much more confidence," she added.
There was no repeat of the violent ethnic clashes that have marred the tournament in recent years with security adopting a firm stance against any unruly spectators.
Police ejected 11 spectators for carrying a flare then standing on seats at the match between Croatia's Ivo Karlovic and Czech Radek Stepanek.
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