Playing in her first tournament since taking over the No. 1 ranking from Serena Williams, Kerber survived a three-setter in her opening match, but the German was unable hold off Kvitova, who moved onto the quarterfinals with a 6-7 (10), 7-5 6-4 victory in a match that lasted three hours and 20 minutes.
"It's always tough to play against Petra," said Kerber. "I think we both played on a really high level over three hours."
"At the end I think there's no loser. I did everything today. I was fighting until the end."
No. 6 seed Venus Williams was also upset, falling 6-2, 6-2 to No. 9 seed Svetlana Kuznetsova of Russia. However, fellow American and No. 8 seed Madison Keys outlasted Russian qualifier Daria Kasatkina 6-1, 4-6, 6-4.
No. 3 seed Agnieszka Radwanska avenged a loss to Caroline Wozniacki at the Pan Pacific Open last week with a 6-4, 6-2 victory Wednesday. Also moving on was fourth-seeded Simona Halep of Germany, a 6-3, 6-3 winner over Kazakhstan's Yaroslava Shvedova, and No. 11 seed Johanna Konta of England, who upset Spain's No. 7 seed Carla Suarez Navarro 7-5, 7-6 (6).
Kvitova will face Konta in the quarterfinals, with Halep playing Keys and Kuznetsova taking on Radwanska. Kuznetsova acknowledged the defending champion Williams seemed off her typical game Wednesday.
"It was a good match. I don't think Venus played her best game. But I've been confident and I've been playing well," Kuznetsova said. "I didn't use couple of my chances in the second set. But, yeah, I still could finish it 6-2.
"I felt like Venus started to play better in the end and it was really important for me to keep the momentum."