Birrell, who secured her place in the WTA 500 Pan Pacific Open as a lucky loser, proved no match for Alycia Parks on Thursday.
The American qualifier, ranked No.65 in the world, romped to a 6-3 6-1 victory to book her place in the quarter-finals, where she will meet Mia Pohankova.
The Slovak wildcard, who turned 18 a week ago, scored a stunning 6-3 7-5 win over four-time grand slam winner, and local favourite, Naomi Osaka.
The win secured Pohankova, the 2025 junior singles champion at Wimbledon, her biggest win and a first last-eight place on tour.
"I believe (in myself) all the time, and yes, it's a really good match against her," Pohankova, who was ranked 659th this time last year, said.
"She's a really good player and I'm just proud of myself. I'm really happy and I hope it's just the start of my career."
In the final match of the day between two players born in Russia but representing Kazakhstan, victory went the way of Elena Rybakina.
The top seed beat Yulina Putintseva 6-2 6-3 and will next face Canadian Leylah Fernandez, a 6-2 7-6 (10-8) winner over fifth seed Elise Mertens of Belgium.
World No.41 Birrell had trouble holding her serve against Parks, the Australian broken five times, while only able to convert one of just two break opportunities she had.
It was a huge disappointment for Birrell, who claimed her first WTA title with a 6-4 6-2 over compatriot Maya Joint in the final of the Korea Open last month.
While Birrell's run in Tokyo has ended, Joint remains in contention after she beat Spain's Cristina Bucsa on Wednesday to secure her place in the quarters.
A day after ousting sixth seed Sorana Cirstea, the Australian's gutsy 6-1 2-6 6-4 over Bucsa set up a clash with Uzbekistan's Kamilla Rakhimova.
Ranked No.66, Rakhimova advanced with a marathon 6-4 4-6 7-6 (7-5) win over Russia's Ekaterina Alexandrova.
Another Australian, Talia Gibson, also had a decent tournament, making her way to the round of 16.
Australia's highest-ranked woman at No.38, Gibson put up a courageous fight before losing in three sets to eighth-seeded Alexandra Eala, of the Philippines.
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