Federer, who has 17 Grand Slam titles to his name, had never lost to Seppi before but he quickly found himself two sets down to the 30-year-old.

The Swiss star did recover briefly by taking the third set but it proved to be in vein as Seppi, who had not beaten a top 10 player in 23 matches, sealed a surprise 6-4, 7-6, (7-5) 4-6, 7-6 (7-5) win.

Federer's defeat would have been music to the ears of both Rafael Nadal and Andy Murray, and the pair duly progressed to the fourth round with comfortable victories.

In the women's draw, Sharapova, who had to save two match points in her previous match, also enjoyed a trouble-free evening as she swept past Zarina Diyas with a commanding 6-1 6-1 win.

On a day where the majority of the top seeds encountered little difficulty, Federer looked in trouble from the start as he failed to find his trademark rhythm and elegance around the court.

Federer has won the Australian Open four times but admitted he had a bad feeling about his encounter with Seppi.

"I felt for some reason yesterday and this morning it was not going to be very simple today," he said.

"I was just hoping it was one of those feelings you sometimes have and it's totally not true and you just come out and you play a routine match."

Nadal banished any demons from his narrow five-set win in round two against qualifier Tim Symczek as he breezed past Israel's Dudi Sela in what was an emphatic performance, cruising to a 6-1, 6-1, 7-5 triumph.

Nadal struggled with injury during his second round win but he had no such troubles this time round ©Getty Images



Fifth seed Murray has been in imperious form so far this week and he made light work of Portugal's Jose Sousea, booking his place in the next round with a 6-1 6-1 7-5 victory.

He faces a clash with Bulgarian Grigor Dimitrov in round four, who was Murray's conqueror at the quarter-final stage at Wimbledon last year.

There was also plenty of action to appeal to the partisan crowd in Melbourne as Australian pair Nick Kyrgios and Bernard Tomic both reached the fourth round.

Kyrgios progressed after he beat Tunisian Malek Jaziri 6-3 7-6 (8-6) 6-1, and the 19-year-old will now face Federer's assailant Seppi in the next round, while Tomic also made it through with a straight-sets win against Sam Groth.

Sharapova had to save two match points in her second round match but swept aside Zarina Diyas with a commanding win in round three ©Getty Images



Sharapova meanwhile looked to be back to her best, dominating with her power from the back of the court which proved too strong for world number 31 Diyas.

Elsewhere in the women's draw, third seed Simona Halep earned a straight sets win against Bethanie Mattek-Sands and Shuai Peng also managed to reach round four.

Eugenie Bouchard, who was at the centre of a sexism row after an Australian reporter asked her to do a twirl after her second round win, beat Caroline Garcia 7-5, 6-0, but 14th seed Sara Errani is out after suffering a surprise loss to Yanina Wickmayer.