On a hot day on Margaret Court Arena, the German Wimbledon champion was left stunned by American Danielle Collins who humiliated her 6-0, 6-2 in under an hour.
Ranked 35 in the world, she is little known on the WTA Tour after playing much of her tennis in the US college system and was making her debut in the main draw at Melbourne Park. She had never won a Grand Slam match before this year.
"I may not have won a Grand Slam match before this but I tell you, it's going to keep happening," said 25-year-old Collins. "I better have many more of these."
Collins said she held no fears about facing three-time Slam champion Kerber.
"I just go out fearless, just give it my all."
Her reward is a last-eight clash with either fifth seed Sloane Stephens or Russia's Anastasia Pavlyuchenkova, who play later.
Hometown hero Barty is also a surprise quarter-finalist after bringing Sharapova's drive to win a first Grand Slam since the 2014 French Open to a grinding halt 4-6, 6-1, 6-4.
She will now meet Petra Kvitova, who matched her best Slam performance since a terrifying knife attack derailed her career by beating unseeded American 17-year-old Amanda Anisimova 6-2, 6-1.
Five-time major winner Sharapova claimed her biggest scalp since completing a drugs ban in 2017 when she rolled defending champion Caroline Wozniacki in round three and looked on track to carry the momentum forward.
The 30th seed won the first set but then fell to pieces in front of a parochial crowd who booed her at times, losing nine games in a row to surrender the second and go two breaks down in the third.
Despite offering some late resistence, and some unbelievable tennis, there was no way back for the 2008 champion.
"She is an absolute champion," Barty, seeded 15, said of Sharapova.
"She was never going to go away. I knew I had to keep chipping away in a sense, trust the work we've done. I know that I can match it with the best."
The diminutive Barty, 22, has been in sizzling form, winning seven of eight matches this year to back up a title victory in Zhuhai late last year.
Next up is Kvitova, who beat Barty in the final of the warm-up Sydney International this month.
The two-time Wimbledon champion's win over Anisimova matched her best performance at a major since being slashed in a terrifying attack at her home in late 2016 that left her with lasting nerve damage in her fingers.
She gingerly returned to action at the 2017 French Open and made the quarters at Flushing Meadow that year, with her efforts Sunday the best since then.
"I'm feeling good. It is important for me to enjoy time on the court and playing tennis, which is the main thing for me," said the Czech, who is in the quarters at Melbourne for the first time since 2012.
"And being in the quarter-final and in the second week of a Grand Slam, I'm really enjoying it."
Roger Federer and Rafael Nadal, with 37 Grand Slam titles between them, have so far been in fine fettle.
The Swiss great, the double defending champion who is targeting a record seventh crown at Melbourne Park, has a tough evening test against young Greek Stefanos Tsitsipas, seeded 14.
The reward for the winner is a quarter-final against either Marin Cilic, who Federer beat in the final last year, or Roberto Bautista Agut, the man who ended Andy Murray's tournament and possibly his career.
Nadal also has an encounter with fellow veteran Tomas Berdych. Whoever wins will meet either 20th seed Grigor Dimitrov or unseeded American birthday boy Frances Tiafoe, who turned 21 on Sunday.AFP