Djokovic, a two-time winner in the Principality in 2013 and 2015, was broken eight times before going down 4-6, 7-5, 6-4 to the 21st-ranked Musetti on a wet and chilly day on the Cote d’Azur, AFP reported.
“(The) feeling is terrible after playing like this, honestly. But congrats to him. He stayed tough in important moments, and that’s it,” said Djokovic.
The Serb led by a set and a break against Musetti, but the Italian youngster fought back in a scrappy second set and then prevailed in the decider after rain interrupted the match for an hour.
Musetti advances to a quarter-final meeting with compatriot Jannik Sinner, who saved a match point before beating Poland’s Hubert Hurkacz 3-6, 7-6 (8/6), 6-1.
Djokovic, the big favourite in the absence of Rafael Nadal and Carlos Alcaraz, surged 5-2 ahead in the opening set. He dropped serve as he tried to close it out before breaking Musetti for a third time.
The top seed again looked in control at 4-2 in the second but was broken easily in a game that started with Djokovic justifiably unhappy over a line call that went against him.
Musetti won the next three games, successfully serving for the second set at the second attempt after blowing his chance while leading 5-4.
A rain shower early in the deciding set forced play to be suspended, with Musetti landing the decisive break to go 5-3 up and eventually sealing victory on his fourth match point.
“I am struggling not to cry because it is a dream for me,” said Musetti, who led Djokovic by two sets at Roland Garros in 2021 before having to retire.
“Beating Novak is something remarkable for me.”
Djokovic, holder of a record 38 Masters titles, has not gone beyond the last eight in Monte Carlo since 2015.
“I don’t think it’s catastrophic, but my feeling is bad right now because I lost the match. That’s all,” said Djokovic.
“It’s not a great day for me, so I’m not really in the mood to speak.”