The world number one would probably have beaten most players even with the errors piling up and his serve out of sync but not Swiss great Federer who sealed a semi-final spot with a match to spare.
Federer has now been responsible for three of Djokovic's six defeats this season, edging ahead 22-21 in their career rivalry.
Djokovic's first indoor loss since 2012, in which time he has won three consecutive London year enders means he needs to beat Czech Tomas Berdych tomorrow to be sure of joining Federer in the semi-finals.
Japan's Kei Nishikori beat Berdych 7-5, 3-6, 6-3 in the day's early offering the first three-set match so far.
While it earned world number eight Nishikori another USD167,000, the reward for a group win, it is likely to prove in vain unless he beats Federer in his final match and Berdych defeats Djokovic.
Djokovic could even scramble through with a three-set defeat, providing Nishikori does not win.
"These kind of things happen. I have to accept it and hopefully work on it tomorrow and get better in the next one," Djokovic, winner of three of the year's grand slams and a record six Masters Series titles told reporters.

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