She responded with six service breaks against the No. 17-seeded Keys, finishing off the match in 51 minutes and improving her record to seven wins in eight matches against the American.
On Wednesday she looked ready to run and run, even if she joked after the match that, as a newly minted 30-year-old, she needed to shorten her rallies.
The second set initially followed a similar pattern, with a dominant Kerber racing into a three-game lead before Keys managed to hold in the fourth.
Hsieh saved two match points on her serve in the seventh game of the third set, forcing Kerber to serve out the match in the next game.
Asked why she was taking this defeat in stride, she replied, "I'm evolving".
Keys, who missed last year's Australian Open after undergoing wrist surgery, had been playing well in her first four rounds at Melbourne Park.
"I'm not going to walk away from this tournament and think it was awful because I had one bad match". "So for me, it's having to play aggressive".More news: Jazz legend Hugh Masekela dies in South Africa, aged 78
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"I feel like I'm playing just solid, consistent tennis".
"Always when I play here I feel such great memories".
She said that going all the way in 2016 in Melbourne gave her confidence about conquering what lies ahead.
Wozniacki next plays Carla Suarez Navarro, who came back from a set and 4-1 down to beat No. 32 Anett Kontaveit 4-6, 6-4, 8-6.
Keys can be extremely tough when she is serving big and swinging with confidence, as she showed against Caroline Garcia, the rising French star, in the fourth round here.
"I'm not going to walk away from this tournament and think it was awful because I had one bad match", Keys said. Kerber, the Australian and U.S. Open victor in 2016, is the only Grand Slam champion remaining in the women's singles draw.
The top seed is guaranteed to meet a Czech opponent for a place in the semi-finals, either sixth seed Karolina Pliskova or Barbora Strycova, the 20th seed, who play later.
"It definitely made me realise how much I love it and how much pressure I put on myself", she said.