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Tenth-seeded Madison Keys was the second top 10 women's player to go out after Greece's Maria Sakkari got the better of her in a 6-4, 6-4 rout.
In other action, world number one Ash Barty overcame a rough start to defeat 29th seed Elena Rybakina 6-3, 6-2 on her way to the round of 16 in the first game of the match.
Seventh seed Petra Kvitova also sailed through to the fourth round with a 6-1, 6-2 win over 25th seed Ekaterina Alexandrova in under one hour.
At Rod Laver Arena, Williams forced a decider after getting herself out of a hole by finally breaking Wang as she served for the match on 7-5, 5-4.
The American however dropped her serve on 6-5, handing her Chinese opponent a ticket to the next round of 16 players and exiting the Australian Open in the third round for the first time since 2006.
"I honestly didn't think I was going to lose that match [after coming back in the second set]," Williams said. "I just made too many errors to be a professional athlete today."
As Williams was battling Qiang, her friend and fellow Melbourne champion Wozniacki was attempting her own comeback against Jabeur in mirror fashion, breaking the Tunisian's serve two games away from defeat.
But the unpredictable game and power of Jabeur proved too much for the 2018 champion.
"I'm always that person that even when I'm down a lot, I've always believed that I can come back and win ... I think throughout the match, there was a couple of times where I was like, 'Shoot, this could be my last one.' It was just like, 'I don't want it to be the last one," Wozniacki said.
"I think the result today doesn't matter to me as much as the way that I fought, that I gave it everything. I wanted to be out there. I did everything ... throughout my career, that's what I'm known for."
Barty, who is hoping to become the first Australian woman to win in the singles at a home open since 1978, did not have the best of starts against the big-serving Kazakh.
The 23-year-old dropped her serve to love to start the match, before immediately breaking back. Neither player managed to hold serve until the fifth game, when Barty finally came through helped by three Rybakina mistakes.
The Australian avoided being broken for the rest of the contest with three good holds in the closing stages of the match to finish in one hour and 18 minutes.
"I think today was my sharpest match," Barty told journalists after the win.
"I felt really comfortable moving around the court, I feel like I found the middle of the racket a lot sooner than my other matches, I think particularly there were a few really tough long service games ... I was able to get out of those to continue the momentum."
Barty may face her friend and doubles partner Julia Goerges in the round of 16. The German player will be in action later on Friday against 18th seed Alison Riske.
In other action, world number one Ash Barty overcame a rough start to defeat 29th seed Elena Rybakina 6-3, 6-2 on her way to the round of 16 in the first game of the match.
Seventh seed Petra Kvitova also sailed through to the fourth round with a 6-1, 6-2 win over 25th seed Ekaterina Alexandrova in under one hour.
At Rod Laver Arena, Williams forced a decider after getting herself out of a hole by finally breaking Wang as she served for the match on 7-5, 5-4.
The American however dropped her serve on 6-5, handing her Chinese opponent a ticket to the next round of 16 players and exiting the Australian Open in the third round for the first time since 2006.
"I honestly didn't think I was going to lose that match [after coming back in the second set]," Williams said. "I just made too many errors to be a professional athlete today."
As Williams was battling Qiang, her friend and fellow Melbourne champion Wozniacki was attempting her own comeback against Jabeur in mirror fashion, breaking the Tunisian's serve two games away from defeat.
But the unpredictable game and power of Jabeur proved too much for the 2018 champion.
"I'm always that person that even when I'm down a lot, I've always believed that I can come back and win ... I think throughout the match, there was a couple of times where I was like, 'Shoot, this could be my last one.' It was just like, 'I don't want it to be the last one," Wozniacki said.
"I think the result today doesn't matter to me as much as the way that I fought, that I gave it everything. I wanted to be out there. I did everything ... throughout my career, that's what I'm known for."
Barty, who is hoping to become the first Australian woman to win in the singles at a home open since 1978, did not have the best of starts against the big-serving Kazakh.
The 23-year-old dropped her serve to love to start the match, before immediately breaking back. Neither player managed to hold serve until the fifth game, when Barty finally came through helped by three Rybakina mistakes.
The Australian avoided being broken for the rest of the contest with three good holds in the closing stages of the match to finish in one hour and 18 minutes.
"I think today was my sharpest match," Barty told journalists after the win.
"I felt really comfortable moving around the court, I feel like I found the middle of the racket a lot sooner than my other matches, I think particularly there were a few really tough long service games ... I was able to get out of those to continue the momentum."
Barty may face her friend and doubles partner Julia Goerges in the round of 16. The German player will be in action later on Friday against 18th seed Alison Riske.
