Williams gave the crowd inside the Rod Laver Arena a long wave goodbye with her hand on her heart following her 6-3 6-4 semi-final defeat by Naomi Osaka.
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Second seed Nadal was on course for a comfortable victory before Tsitsipas turned the match around to prevail 3-6, 2-6, 7-6 (7/4), 6-4, 7-5 in a seismic upset.
The second seed came into the tournament with serious concerns over a back problem but revealed after beating Britain’s Cameron Norrie in the third round that it had finally started to improve.
Both advanced into the fourth round of the competition in five-set thrillers.
The 40-year-old American, a seven-times Grand Slam winner and twice finalist at Melbourne Park, suffered a 1-6 0-6 defeat.
Also, world number three seed Naomi Osaka cruised past Russian Anastasia Pavlyuchenkova 6-1 6-2.
Williams, the winner of 23 Grand Slam singles titles, had set up a mouth-watering semi-final clash against world number one Australian Ash Barty after defeating fellow American Danielle Collins 6-2 4-6 (10-6) on Margaret Court Arena.
Victorian state Premier Daniel Andrews said the man last worked at the Grand Hyatt Hotel in Melbourne on January 29 and anyone there was considered a casual contact.
The players did something different by soaking up their freedom after 14 days of quarantine ahead of the Australian Open.
“Gutted to share that I won’t be flying out to Australia to compete at the Australian Open,” Murray was quoted as saying by British media on Friday.
The demand for a reduction was due to players’ inability to train at required level amid the strict COVID-19 quarantine rules.
Health authorities in Victoria state have now reported nine infections among passengers who arrived on charter flights for the February 8 to 21 Australian Open and officials said more cases may come to light as testing continues.
Twenty-five players – thought to mostly be qualifiers – on board the flight from Doha to Melbourne must isolate in their room for 14 days.
Players and officials have to undergo a mandatory 14-day quarantine on arrival in Australia before they participate in warm-up events from January 31 at Melbourne Park, where the major will be held from February 8 to 21.
The former world number one was due to travel to Australia on one of a series of charter flights laid on by tournament organisers, but is still isolating at home in London.
Thirty-three-year-old Murray, who is self-isolating and in good health, was awarded a wildcard to play in the main draw of the year’s first Grand Slam in Melbourne.
The development followed a threat of legal action from apartment owners at a luxury hotel in Melbourne
The apartment owners at the Westin Melbourne are concerned for their health and never agreed to international players quarantining at the hotel, their lawyer Graeme Efron told Reuters on Monday.
The 39-year-old Swiss, who has won the tournament six times, is recovering from the knee injury that has kept him out of action since losing to Novak Djokovic in the semi-final at the 2020 event.
Tennis Australia and the Victorian state government confirmed that the tournament had been pushed back three weeks to start on February 8 after drawn-out negotiations over COVID-19 measures.