Williams had won 19 consecutive matches and three straight tournaments, including Wimbledon and the Olympics, before being eliminated by Kerber 6-4, 6-4.
It was only their second career meeting, the other one having come five years ago in the opening round of the U.S. Open, when Williams recorded a 6-4, 7-5 victory.
This was the seventh victory against a Top 10 player for Kerber this year.
Venus Williams reached the semifinals with a 6-2, 6-7 (2-7), 6-4 decision over Samantha Stosur. The match took 2 hours, 34 minutes to complete.
This will be the first semifinal appearance for Venus Williams since the 2010 U.S. Open. Her career has been slowed by an autoimmune disease during the last two seasons.
Li Na will meet Venus Williams in the semifinals after winning twice Friday.
Li ousted Johanna Larsson 6-2, 6-2 in a third-round match that had been postponed from Thursday by rain and she then upset top-seeded Agnieszka Radwanska 6-1, 6-1.
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