The Belarusian was unable to avoid her 11th defeat by the reigning US Open champion, meaning world No2 Maria Sharapova could still usurp Azarenka in the end-of-year ranking race.
The top seed faces China’s Li Na on Friday knowing victory will secure her place in the last four and secure her the top ranking.
“I have been practising hard and expected to play better,” said Azarenka.
“When I did the right things I was in control much of the time, but I didn’t have the consistency today.”
She added: “I will give everything to win [on Friday]. I will give 200 per cent. I have another opportunity to stay in the tournament and to keep the dream alive.”
Elsewhere, in the white group, Sara Errani secured a 6-2 3-6 6-0 victory over Petra Kvitova’s replacement Sam Stosur to move a step closer to the semi-finals.
The Italian will face Agnieszka Radwanska in a “tough” decider to decide who progresses from the group alongside French Open winner Sharapova.
“Sam is a great player but I was ready today,” said Errani.
“I’m happy I won and that I’m still in the tournament – I hope I can play well tomorrow too and maybe win, I don’t know, we’ll see how it goes.”
Errani added: “She [Radwanska] is a very strong player. I know her and we have played before. It will be a tough match and we will see what happens.”
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BIOGRAPHY: Marcus Rashford