The loss on the Miami hardcourts was the first since 2012 for William, who had swept the last three titles in her unofficial home tournament.
“I’m really thrilled,” said Kuznetsova after registering her first win over Williams since 2009. “I’m sorry fans, who are disappointed that Serena’s not going to keep playing, but for sure she’ll be at more events than here.
“I’m really happy with my performance. I tried to stay at a good level the whole game. I think I did that pretty well and I’m happy with the way I served today.”
It was a day of dramatic upsets at Crandon Park, as Williams stepped onto the Stadium court for her Round of 16 match immediately after third-seeded world number two Agnieszka Radwanska of Poland was tripped up by 19th-seeded Swiss Timea Bacsinszky 2-6 6-4 6-2.
Radwanska was the winner on the Miami hardcourts in 2012 before Serena Williams embarked on her three title run.
The upsets continued into the afternoon with fourth-seeded Spaniard Garbine Muguruza falling 7-6(6) 7-6(4) to 13th-seeded Belarusian Victoria Azarenka, still in top form following her victory this month at Indian Wells.
A tight first set saw both Williams and Kuznetsova register a break but neither player could gain the upper hand, sending the opener to a tie-break which the top-seeded American dominated 7-3 with the help of a pair of thundering aces.
A battling Kuznetsova controlled the second set from the start, breaking the 21-times grand slam winner to go up 3-1 then sweeping the next three games to level the contest at a set apiece.
The Russian upped the pressure with a pair of breaks to start the third as she stormed through the opening three games before Williams finally stopped the bleeding with a break of her own at 3-1.
The relief was brief, however, as former U.S. and French Open champion Kuznetsova immediately hit back with yet another break and went on to finish off the upset in just over two hours.
In other action, fifth-seeded Romanian Simona Halep eased into the quarters with a tidy 6-3 6-4 decision over British wildcard Heather Watson.
Britain, however, will be represented in the last eight as Johanna Konta tamed another Romanian, Monica Niculescu, 6-2 6-2.
(Reporting by Steve Keating in Toronto; Editing by Larry Fine)