An injury-hit Serena Williams crashed out of the Australian Open against Ana Ivanovic today, denying her an 18th major title and the chance to win a rare calendar-year Grand Slam.

Williams won the first set but Ivanovic, capitalising on her poor movement and high error-count, took her first ever set against the top seed and then raced through the decider to win 4-6, 6-3, 6-3.

The shock result robs Williams of the chance to join Chris Evert and Martina Navratilova on 18 Grand Slams, and draw nearer to Steffi Graf's Open-era record of 22.

It also puts paid to her bid -- talked up by her coach, Patrick Mouratoglou -- to win all four Grand Slam titles this year, a feat last achieved by Graf in 1988.

Williams' departure provides a giant opportunity to those left in the draw, including Ivanovic, defending champion Victoria Azarenka and Li Na, who beat Ekaterina Makarova to reach the quarter-finals.

Afterwards, the American world number one confessed that she was on strong medication for a back injury and nearly pulled out injured before her third-round win over Daniela Hantuchova.

"I almost pulled out. I'm such a competitor. I mean, I probably should have," Williams said.

She added: "I made a tremendous amount of errors, shots I missed I normally don't miss, I haven't missed since the '80s. I'm just not used to missing those shots."

Five-time champion Williams has a chequered recent record at the season's opening Grand Slam. Last year, she struggled with an ankle problem before going out in the quarter-finals.

In 2012, she was shocked in the fourth round by Makarova and in 2011, she missed the tournament with a long-standing foot injury. Her last victory at Melbourne Park was in 2010.

Williams was on a 25-match winning streak and at 32, is coming off one of her most successful seasons when she won a career-high 11 titles, including the French Open and US Open.

But she appeared unperturbed by the latest setback and gave credit to Ivanovic, now in only her second Grand Slam quarter-final since winning the 2008 French Open.

"I obviously wasn't hitting the way I normally would hit and wasn't moving the way I normally would move and making a lot of errors that I normally would not make and I haven't made in a couple of years.

"But it's okay. You know, I feel like I know for a fact I can play so much better than what I did today, so with that, knowing that, I'm not disappointed or anything. I just know that I can play 10 times better than what I did today."

Ivanovic, the former world number one who is resurgent under new coach Nemanja Kontic, will now play either up-and-coming Canadian Eugenie Bouchard, 19, or Australia's Casey Dellacqua.

China's Li was irresistible in her 6-2, 6-0 win over Russian 22nd seed Makarova as the two-time finalist reached the last eight in just under an hour.

The 2011 French Open champion will next play fellow veteran Flavia Pennetta, who is also 31 and exactly one day older than the Chinese number one. Italy's Pennetta beat German Angelique Kerber 6-1, 4-6, 7-5.

"At least she's one day older than me, so I'll play an older player," quipped Li. "So nobody will talk about my age."