The 37-year-old American, aiming for a record-equalling 24th Grand Slam title, produced 19 unforced errors, including a bizarre mistake when she leaned over the net to hit a volley and had the point docked.
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Millman advanced to a quarterfinal match-up against sixth seed Novak Djokovic
The 14th-seeded American, looking to go one better than her runner-up finish at Flushing Meadows last year, relied on both her dangerous serve and powerful groundstrokes.
Despite the windy conditions, Williams improved to 5-2 on the season, which includes a third round win on Monday over sister Serena, who was making her return to the WTA after having a baby
She lost to her younger sister Serena Williams at the Australian Open and to Garbine Muguruza at Wimbledon.