Needing to reach the final of the Paris Masters to maintain his No. 1 ranking, the three-time defending champion crashed out in the last-eight stage.
Djokovic faced Marin Cilic, a man he had beaten in their previous 14 meetings, but this time the 2014 US Open champion
came out on top -- triumphing 6-4 7-6 (7-2) in one hour and 45 minutes.
His last defeat in the tournament was in 2012, and he won it for the first of four times in 2009.
It leaves the door open for second-ranked Andy Murray, beaten by Djokovic in last year's Paris final and also the title match at June's French Open, where the Serbian completed his collection of grand slam crowns.
Murray needs to reach the final again to become the No. 1 in men's tennis for the first time, having reached No. 2 as long ago as 2009. Djokovic has been No. 1 since July 2014.
Two-time Olympic champion
Murray gained the first of his two required victories by defeating Czech seventh seed Tomas Berdych 7-6 (11-9) 7-5 in Friday's third quarterfinal.
His semifinal opponent Saturday will be Canadian fourth seed Milos Raonic, who the Brit overcame in July's Wimbledon title match to claim his third grand slam.
Raonic saw off home hope Jo-Wilfried Tsonga in the final quarterfinal in straight sets, a result that ensures Dominic Thiem will take up the final spot in the ATP World Tour Finals later this month.
Cilic had already qualified for the season-ending ATP World Tour Finals by beating Belgian eighth seed David Goffin on Thursday.
"He definitely played better today, and he deserved to win," Djokovic said of his Croatian opponent. "I wasn't on the level that I could have been on.
"I was in a good position to take the match into the third set, and then two double faults. Just in important moments I wasn't able to deliver."
Ninth seed Cilic will face John Isner in the semis, after the big-serving American beat his younger compatriot Jack Sock 7-6 (8-6) 4-6 6-4.
Cilic's only career Masters-level final was in August -- when he beat Murray in Cincinnati, following a third-round exit at Rio 2016.