Top seed Stanislas Wawrinka ousted American Sam Querrey 6-2 6-2 and will play Marinko Matosevic in the quarter-finals after the Australian overcame an ankle injury to spring another shock by defeating a below-par Jo-Wilfried Tsonga 6-2 6-4.
World number six Tomas Berdych also progressed with a 7-6 (2) 6-4 win over Frenchman Adrian Mannarino.
The manner of Murray’s 7-6 (10) 6-2 defeat by Stepanek will do nothing to boost the British number one’s confidence as he squandered eight set points in the opener before tamely surrendering the second.
The result snapped the world number five’s 19-match winning streak on grass, a sequence that started in 2012 with his run to Olympic gold in London.
“I have only got myself to blame that I lost the first set. I don’t know how many set points I had but quite a lot of them were on my serve,” defending champion Murray told reporters.
“On this surface especially you shouldn’t really be losing sets like that. That’s what is disappointing really about the match.”
New coach Amelie Mauresmo, a former Wimbledon champion herself, kept a poker face as the match headed towards a disappointing conclusion but she would have noted the challenge that lies ahead over the next 10 days before Murray opens Centre Court proceedings at the All England Club on June 23.
Murray’s dropshots were off target, often falling short of the net, his backhands kept misfiring and there seemed to be a never-ending stream of forehand errors flying off his racket.
If such errors prove costly against a player he had beaten in five of their six previous meetings, the Scot’s chances of overcoming rivals such as Rafa Nadal, Novak Djokovic and Roger Federer at the grasscourt major look rather perilous.
“I need to spend time on the courts practising some things,” admitted Murray. “Returning first serves, I wasn’t quite as sharp on that as I would have liked.
“I didn’t win that many points when he made his first serve. Normally that’s quite a strong part of my game.
“I’ll need to practice that a little bit over the next few days. I have played well on grass over the last few years so I would have hoped to have done a bit better,” said Murray.
A year after completing a Queen’s Club-Wimbledon double, Murray was strangely off colour as he allowed Stepanek to steal the opening set with a delightful crosscourt volley.
Any hopes of a revival fell flat early in the second set when he surrendered the opening game with a forehand error and Stepanek made sure he made the most of his chances.
The wily Czech, who at times gave Murray the runaround, sealed an impressive victory when his opponent sliced a backhand into the net on match point, leaving the crowd stunned and the home favourite frustrated.
“When you play the best in the world you have to come up with the best … they bring the best out of you and it was a great win for me,” Stepanek said courtside after setting up a quarter-final with South African Kevin Anderson.
Wawrinka was impressive in dispatching Querrey for the loss of four games in 50 minutes but has spent little time on court this week after second-round opponent Marcos Baghdatis retired hurt after five games on Wednesday.
The 29-year-old Swiss said his performance was not paramount, adding the emphasis was on time playing on grass ahead of Wimbledon.
“It’s a faster surface so you don’t have that much time,” said Wawrinka. “You need to be ready to play more aggressive – you need to trust your game, you need to go for it.
“It’s never easy the first few matches because the grass is faster. Even if you lose you can still practice.”
In the final game on Centre Court, Tsonga never looked like imposing himself on Matosevic and was broken twice in the opening set against an opponent who produced a number of powerful groundstroke winners.
Berdych squandered 17 break points on the way to winning the first set against Mannarino but his extra class told in the second.
(Reporting by Pritha Sarkar, editing by Tony Jimenez)