In a marathon three-set match, the inconsistent 14th seed continued her recent poor run of form as she struggled to overcome her close friend Kirilenko.
The Russian star missed last yearÃ¢â‚¬â„¢s competition with a shoulder injury but had added the 2008 Australian Open trophy to her glittering record which already boasted US Open and Wimbledon championships.
Sharapova made an incredible 66 unforced errors and 11 double faults as she struggled to find her serving rhythm. Her compatriot gained confidence and seized the momentum in the match.
Indeed the player ranked 44 places below the 2008 winner took advantage of the rustiness of her opponent. Sharapova was seen as one of the pre-tournament favourites but that illusion was shattered as the game trickled into a deciding set.
Played under the roof on the Rod Laver court, Kirilenko surged into a 3-0 lead in the deciding set. She was unable to successfully serve for the match but managed to break Sharapova to claim an historic victory.
The 58th ranked player navigated her way past the former world number one in three hours and 20 minutes, winning 7-6 (7-4), 3-6, 6-4.
Elsewhere, US Open winner Kim Clijsters easily overcame her opponent in the first round 6-0, 6-4 while last yearÃ¢â‚¬â„¢s runner-up, Dinara Safina, edged past Magdalena Rybarikova.
Justine Henin is also in action in the women’s singles later on Monday, in an all-Belgian clash with Kirsten Flipkens as Henin makes her much-anticipated comeback to Grand Slam tennis.
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BIOGRAPHY: Cesc Fabregas