Gauff was aiming to become the first woman to retain her crown at Flushing Meadows since Serena Williams in 2014 but succumbed to a 6-2 4-6 6-3 loss to Olympic team-mate Emma Navarro.
Navarro is playing in her hometown city and looks a credible contender for a maiden grand slam title, having beaten her opponent for the second-successive time in a grand slam.
Gauff was off the pace for much of the tournament and exited at the first sign of real competition.
She was not helped by her serve going missing in action as the 2023 champion sent down 19 double faults and fired 60 unforced errors.
Navarro said: “It’s pretty insane. I lost in the first round the last two years and now to be making the quarter-finals is pretty insane.
“This is the city I was born in and it feels so special to be playing here.
“Coco is an amazing player. I have a ton of respect for her and I know she’s going to come back here and win this thing again.”
Navarro will now play Paula Badosa in the last eight.
