The loss brings her 15 game winning streak to an end, with a shock loss to American Alison Riske.
Riske is high on confidence, though she'll have to better her own first serve percentage of 67% against Barty if she wants to get any further in the tournament.
"I think when my body is healthy, when I'm feeling good, I would love to play doubles and I'd love to continue to play as much doubles as I can", she said at her post-match press conference.
Riske, who has won nine of her last 10 matches, broke Barty for a 5-3 lead in the decider then stayed calm and served out a controlled one hour, 37-minute triumph.
Williams, seeded 11th, had little match practice coming into Wimbledon because of injury and teamed up with Andy Murray in the mixed doubles to get some more playing time. "It's a tough one to swallow but I lost to a better player". "I'm very proud of what we've been able to achieve".
Australian world number one Ash Barty is out of Wimbledon.
Later on "Manic Monday", Williams, 15-year-old sensation Coco Gauff and the men's Big Three of Roger Federer, Rafael Nadal and Novak Djokovic are on the schedule as Wimbledon resumes after its traditional day off.
Barty skirted a number of potential controversies in her no-nonsense style, refusing to buy into outrage back home over a number of perceived slights ranging from "sexist broadcasting" to Serena Williams's ignorance of her top ranking.
"There are many things about her that have impressed me", she told Sky Sports. "Like even today I won a lot of points. But, you know, every match is still super hard", she said.
Alison Riske of Pittsburgh, PA delivered one of the most memorable tennis victories of her career on Monday.
Riske is now into a Grand Slam quarter-final for the first time in her career, and will face the victor of the match between United States great Serena Williams and Spain's Carla Suarez Navarro, which will be played later on Monday. It's going to be a huge challenge, but I'm really looking forward to it. Barty burst through the first set firing eight of her 12 aces and winning 13 of 14 first-serve points.
The win potentially pits her against new 9/4 tournament favourite Serena Williams - who has seen her odds slashed by tennis betting traders from 11/2 - but the multiple grand slam victor better not count her chickens too early either. "I'm ready for a war".
Third seed Nadal, the 2008 and 2010 champion, swept to an easy 6-2, 6-2, 6-2 win over outclassed Joao Sousa of Portugal to book his place in a seventh quarter-final at the All England Club.
"I think for me personally, no, I haven't lived my life any differently", she said.
Barty broke straight back when she unfurled a brilliant backhand victor down the line - a conventional two-hander this time rather than her one-handed slice - to make it 5-3 and the Aussie clinically served out the set.
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