MELBOURNE: Seven-times champion Serena Williams suffered a dramatic exit from the Australian Open on Friday, her earliest in 14 years, falling 6-4 6-7(2) 7-5 to China's Wang Qiang in a stunning third round upset that tore the women's tournament open.

Wang, who was thrashed 6-1 6-0 by Williams in the US Open quarter-finals, savoured sweet revenge on Rod Laver Arena to end the American's bid for a record-equalling 24th Grand Slam title, sending shockwaves through Melbourne Park.

A day before the Chinese New Year, 27th seed Wang wavered when serving for the match at 5-4 in the second set but was magnificent under pressure in the decider.

She broke Williams's formidable serve to seal the thriller on the third match point when the American dumped a backhand into the net.

It was Williams' earliest exit from the year's first Grand Slam since 2006, when her title defence was ended by Daniela Hantuchova.

"I think my team always believe I can do it," Wang said on-court. "After last (I played Serena), I did really hard work on the court and off the court, it's really good work and I believed I could do it.

"During the second set I was a little bit confused but in my mind I knew I had to focus on the court, focus on every point."

Wang, 28, said Chinese New Year celebrations would be on hold before her fourth round clash against Tunisia's Ons Jabeur, who knocked out Williams's good friend and former world number one Caroline Wozniacki, drawing the curtain on the retiring Dane's career in tennis.

"(I'll) take a rest and just prepare for the next match," she said.

A slow-burning contest burst into life in the ninth game when Wang broke Williams to love, raising a gasp from the crowd with a breathless rush to the net.

Williams's shrieking hit ear-splitting levels but Wang, unintimidated, calmly served out the set.

The Tianjin native broke Williams again in the second set but was denied a quick kill by the American's spirit and backhand.

Williams fired a pair of thumping winners before levelling terms with a forehand crosscourt at the end of a frenetic 24-shot rally.

The significance of the occasion lay heavy on Wang in the tiebreak, as Williams roared ahead to level the match.

But Wang kept counter-punching, only denied another early break in the deciding set by the formidable Williams serve.

It was clear that Wang would need to produce something special to upset her iconic opponent and she nosed ahead to 6-5 after a blistering backhand that clipped the line.

She squandered two match points with a pair of unforced errors in the final nerve-shredding game but held firm to capture arguably the finest Grand Slam win of her career.