Murray, who is the defending champion of the event, slipped past qualifier John Millman 6-1, 5-7, 6-3, Millman forced 10 break points on Murray but was able to finish off only two, both in the second set.
Murray lost as many points on serve in the second set -- 18 -- as he did in the first and third sets combined.
Grigor Dimitrov was on the court just 61 minutes in dispatching Raonic 6-3, 6-4. He lost 11 points in 10 games serving and saved both break points he faced while posting a break in each set.
Murray draws Istomin in Friday's quarterfinals while fourth-seeded Alexandr Dolgopolov plays No. 5-seed Kei Nishikori in the other match in the top half of the draw. Melzer goes against Dimitrov and third-seeded Gilles Simon meets Marcos Baghdatis in the other quarterfinals.