Murray had played solidly on his return to the court after a month in his opening match against Marcel Granollers. But the Brit looked flat from the outset against Gulbis and was brushed aside in just one hour and 28 minutes.
The early signs of the match looked good for Murray as he produced more on his serve than against Granollers 24 hours before, opening in a confident fashion and even holding break points in the seventh game.
But the mecurial Gulbis also looked on form as he made an equally solid start to the match, pushing Murray to deuce in both the fourth and sixth games before defending those break points in the seventh with a couple of big serves.
Murray also found himself trailing in the 10th game, Gulbis racking up three set points with the rally of the match – absorbing everything Murray could hit at him before popping a neat forehand drop shot just over the net.
The Brit did manage to save the first with a big serve but Gulbis was not to be put off and took the set at a second attempt with a cross court forehand return of serve winner.
Gulbis then quickly extended his lead, breaking in the fourth game of the second set as the wheels came off for Murray. Another error from the Brit saw him gift Gulbis three break points and, although Murray saved the first with an ace, the Latvian did enough with a passing shot on the second to force the error from his opponent.
Murray immediately broke back, a poor game from Gulbis being capped by a spectacular point from the world number two, ending with a flicked backhand passing shot winner across court.
But that was to be the highlight for Murray as Gulbis re-established his break advantage three games later, Murray putting a tricky backhand smash into the bottom of the net before the Latvian secured the game with a cross court backhand winner.
That left Gulbis serving for the match, an opportunity the in-form Latvian was never going to waste. The world number 38 barely broke a sweat in the final game as he fired down an ace on his first match point to seal the win.
Next up for Gulbis will be a big-hitting clash against home hope Milos Raonic, seeded 11th at this year's tournament.
Murray, meanwhile, will head for next week's Cincinnati Masters hoping for a better run as he continues preparation for the defence of his US Open title at the end of the month.
"The goal is to try and peak at the US Open," Murray said. "But to do that you need to make sure you prepare yourself well and obviously I would have liked to have done better here."