Karlovic didn't manage a break point in the match but still emerged with a 4-6, 7-6 (7-4), 7-6 (7-2) win. Berdych cashed in the only break opportunity of the first set but wasn't able to finish off the one chance he had in the second set or any of the three he had in the third.
Karlovic edged ahead late in the second-set tiebreaker but jumped out to a 6-1 lead in the second before finishing the upset.
Berdych remains in fairly good shape to merit an invitation to the ATP World Tour Finals but fourth-seeded Stanislas Wawrinka's chances for an invitation took a tumble in a 6-4, 6-3 loss to Edouard Roger-Vasselin. Roger-Vasselin didn't lose his serve and broke Wawrinka's three times.
Daniel Brands also posted an upset win, eliminating seventh-seeded Andreas Seppi 7-6 (7-3), 6-3 behind 12 aces. No. 6 Kei Nishikori kept seeded players from being shutout Tuesday with a 6-2, 6-4 victory over Marco Chiudinelli.
In other first-round matches, Marcos Baghdatis dropped Benjamin Becker 7-6 (10-8), 6-1; Denis Istomin beat Horacio Zeballos 7-5, 7-6 (7-3); and Ivan Dodi advanced after going up 2-0 and having Carlos Berlocq retire.