The Russian's chances of recapturing her 2004 title rose at the weekend when world No.1 Serena Williams was surprisingly beaten in the third round, but she joined the list of big-name casualties after a 7-6(4) 4-6 6-4 defeat on Centre Court.
The below-par fifth seed fought off six match points in a gripping final set that had hearts pounding on and off the court, but finally succumbed when she fired a backhand long.
Out-hit for most of the match, 2012 semi-finalist Kerber often resembled a climber hanging on to a cliff face by the fingertips as she stretched every sinew to retrieve a barrage of power from Sharapova, but she would not let go.
"It's unbelievable, it was such a tough match, playing on a high level and it was so close," 26-year-old Kerber, seeded nine, said after catching her breath. "I'm so happy, she's a great player on grass, but I was just focusing on myself and I'm so happy to be in the quarters."
Both players had been out of action since Saturday, after foul weather meant their fourth-round clash was postponed on Monday, and it was Kerber who was quicker into her stride, leading throughout the first set.
Sharapova finally found her range to break back at 4-5 but some poor errors allowed the 26-year-old Kerber to win the last three points of the opening set tiebreak.
The Russian hit back to level the match and seemed to be favourite to book a quarter-final place but Kerber, defending for all her worth, moved into a 5-2 lead in the decider.
Sharapova saved a match point at 2-5 and Kerber's nerve failed her at 5-3 as she served a double-fault on the way to dropping her serve. The real drama was saved until the end with Sharapova saving five more match points, three in a row from 0-40, and looking poised to complete a remarkable comeback.
Kerber would not be denied, though, and showed remarkable resilience to prevail in a rally that had both players scampering to all corners of the court before Sharapova rolled a forehand into the net.
Sharapova then hit a backhand long to end the contest and send her packing along with Williams, second seed Li Na and 2012 runner-up Agnieskza Radwanska, the fourth seed. Kerber will have to recover quickly as she faces Canada's Eugenie Bouchard on Wednesday for a place in the semis.
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