Sharapova, who won the prestigious tournament in 2006 and again last year, was sent packing after a 6-3 4-6 7-5 defeat to Giorgi, a 22-year-old ranked 79th in the world.
Giorgi has been making steady progress in the past year, reaching the fourth round at the US Open in September, but her win over the fifth-ranked Sharapova was the biggest of her career.
Sharapova's loss came two days after Victoria Azarenka was also bundled out of the Californian event.
"I did not play a good match at all," said Sharapova, who dropped serve eight times and committed 58 unforced errors.
"(I've) never played against her, but she's someone that doesn't give you much rhythm. She's quite aggressive, but some shots she hits incredible for a long period of time.
"Sometimes they go off a bit. But, if I'm speaking about my level, it was nowhere near where it should have been."
Giorgi will play her countrywoman Flavia Pennetta in the next round after she beat Australian Sam Stosur 6-4 3-6 6-1.
Despite dishing up nine double-faults and having her own service broken twice, Li was far too strong and streetwise for Pliskova, wrapping up the win with an ace.
"At least I could win the last point and stay in the tournament," Li said.
"If you're a tennis player, you'll make double faults. At least I can improve my serve even more from here."
Li is looking to win her first Indian Wells title and continue her great start to the year after capturing the Australian Open.
BNP Paribas Open results
17-Sloane Stephens (U.S.) beat 11-Ana Ivanovic (Serbia) 7-6(3) 6-4
12-Dominika Cibulkova (Slovakia) beat 23-Ekaterina Makarova (Russia) 6-4 7-5
Alisa Kleybanova (Russia) beat Maria Teresa Torro (Spain) 6-1 6-3
8-Petra Kvitova (Czech Republic) beat 27-Svetlana Kuznetsova (Russia) 6-3 2-6 6-0
Camila Giorgi (Italy) beat 4-Maria Sharapova (Russia) 6-3 4-6 7-5
20-Flavia Pennetta (Italy) beat 16-Samantha Stosur (Australia) 6-4 3-6 6-1
Aleksandra Wozniak (Canada) beat 21-Anastasia Pavlyuchenkova (Russia) 6-1 6-7(3) 6-0
1-Li Na (China) beat Karolina Pliskova (Czech Republic) 6-3 6-4
- Sports & Recreation
- Flavia Pennetta
- Karolina Pliskova
- Victoria Azarenka