Djokovic was chasing his fifth Rogers Cup title but was beaten in three sets by Tsitsipas, who turns 20 this weekend.
A confident Tsitsipas sent a blistering forehand to the back corner while the ninth-seeded Serbian was heading the other way on his first match point, looking at his box in disbelief. "I knew I was playing pretty good today".
Djokovic, the victor of 30 career Masters titles. will next face either seventh seed Dominic Thiem, who has yet to step on to a hard court this summer with the US Open just over a fortnight away, or rising Greek youngster Stefanos Tsitsipas.
Tsitsipas is guaranteed to rise to a career-high ranking no matter what happens in his next match. "But I just played not that great, especially from the baseline".
"He played very well and deserved to win without a doubt", Djokovic said.
Peter Polansky defeated Matthew Ebden in straight sets to reach the second round and book a clash against Novak Djokovic or Hyeon Chung.
Kevin Anderson and Grigor Dimitrov are also through to the last eight.
The big-serving sixth-ranked South African hit 15 aces and won 86 per cent of first serves in en route to the 7-5 6-3 victory.More news: Manchester United prepared to pay £100m for Real Madrid's Raphael Varane?
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Del Potro had a bye into the second round and was scheduled to face Dutchman Robin Haase.
The 31-year-old Fognini spouted some words towards an energetic Shapovalov during the changeover after his third break, but Shapovalov said he didn't understand him. "It gave me the win at the end".
In the third set, the teenager showed great composure to break for a 2-0 lead and then saved a break point for a 3-0 margin.
Bulgarian fifth seed Grigor Dimitrov laboured for nearly two and a half hours to subdue Frances Tiafoe of the United States 7-6 (7/1), 3-6, 7-6 (7/4).
Djokovic, a 13-time Grand Slam champion, couldn't claw back and eventually seemed resigned to the result, even smiling a few times in the final game. He rose to prominence previous year with a stellar run at the Rogers Cup in Montreal that ended with a semifinal loss to eventual champion Alexander Zverev. 'I do remember when I played Djokovic, I was able to get to the point, and I was able to construct points the way I wanted to.
For the resident of Athens, who arrived in Toronto fresh off a run to the semi-finals in Washington where he lost to German world number three Alexander Zverev, the win is the latest in a breakthrough campaign during which he has reached the quarter-finals or better at seven ATP main tour events.
"I actually feel like there is more time now than before because the shot clock starts counting down once the chair umpire calls the score", Djokovic said.