Welshman Williams won the 2000 and 2003 Crucible titles but lost a final-frame decider to world number 67 Yupeng, who then defeated Jin Long 4-2 in the quarter-finals.
Long was the only amateur to make the fifth round after knocking out Niu Zhuang 4-2 to get there and Shi Hanqing lost by the same score to Barry Hawkins.
Hawkins lost his quarter-final over seven frames to Xiao Guodong, who also sent Marco Fu packing.
Guodong meets Stephen Lee, the last non-Chinese player left in the tournament, for a place in the final after the world number seven cruised past Chen Ruifu and Joe Perry.
Ding defeated Tom Ford 4-1 and Marcus Campbell 4-2 to set up a last-four showdown with Yupeng.
Both the semi-finals and final will be played Thursday morning.
Asian PTC2 Round Four results
Niu Zhuang 2-4 Jin Long
Cao Yupeng 4-3 Mark Williams
Ding Junhui 4-1 Tom Ford
Matthew Stevens 3-4 Marcus Campbell
Shi Hanqing 2-4 Barry Hawkins
Marco Fu 1-4 Xiao Guodong
Rob Milkins 4-1 Ben Woollaston
Joe Perry 0-4 Stephen Lee
Quarter-final results
Jin Long 2-4 Cao Yupeng
Ding Junhui 4-2 Marcus Campbell
Barry Hawkins 3-4 Xiao Guodong
Robert Milkins 1-4 Stephen Lee
