With girlfriend Maria Sharapova cheering him on from the stands on Court 3, the 29th-seeded Bulgarian fell to 55th-ranked Slovenian Grega Zemlja 3-6, 7-6 (4), 3-6, 6-4, 11-9.
Zemlja hit a forehand passing shot on his sixth match point to become the first Slovenian to reach the third round at the All England Club.
While the 22-year-old Dimitrov is going home early, 35-year-old veteran Tommy Haas is moving ahead. The 13th-seeded German beat qualifier Jimmy Wang of Taiwan 6-3, 6-2, 7-5 to make the third round for the eighth time.
In women's play, seventh-seeded Angelique Kerber of Germany was ousted in the second round by Estonia's 46th-ranked Kaia Kanepi, 3-6, 7-6 (6), 6-3. Kerber is the sixth among the top-10 seeded women ousted so far.
Kerber, who reached the semifinals here last year, blew a 5-1 lead in the second-set tiebreaker when she was just two points from victory. Kanepi, a Wimbledon quarterfinalist three years ago, double-faulted twice on match point before converting her third chance with a backhand winner.
Also, Britain's Laura Robson beat 117th-ranked Colombian qualifier Mariana Duque-Marino 6-4, 6-1 under the closed roof on Centre Court to reach the third round here for the first time.
Robson, who won the Wimbledon girls' title in 2008, has climbed steadily up the rankings and has a good chance of getting into the second week.
"It's a big win for me," Robson said. "Any match on Centre Court is a big one. It was a great atmosphere out there today, and the roof being closed just makes it louder."
Also scheduled on Centre Court: No. 15 Nicolas Almagro of Spain vs. Jerzy Janowicz of Poland, and No. 2 Andy Murray of Britain against Tommy Robredo.
Dimitrov is known as "Baby Fed" for a playing style, especially his one-handed backhand, that resembles that of Roger Federer. But like Federer, the seven-time Wimbledon champion who was stunned in the second round on Tuesday by Sergiy Stakhovsky, Dimitrov failed to get to Round 3.
The Dimitrov-Zemlja match had been suspended by rain on Thursday with the Slovenian up 9-8 on serve in the fifth set. Dimitrov had saved two match points up until then.
The start of play was delayed Friday by rain. When the match did resume, Dimitrov lost his footing on the fifth point and tumbled backwards on the wet grass, setting up a match point for Zemlja at 30-40.
Dimitrov walked straight to his courtside chair, telling the umpire the conditions were too dangerous to continue. With light drizzle falling, chair umpire Ali Nili said the match would stop until the rain let up.
"When I slipped, I fell down, I hit my hip," Dimitrov said. "I told him, I'm not serving. Basically we had to stop and wait for another chance."
Both players sat on their chairs for about 10 minutes before play resumed. Dimitrov came back out facing match point — the third of the contest. He hit a 113 mph second serve that forced a forehand return into the net.
"You sit down, you're aching a little bit, you've got to serve to stay in the match," Dimitrov said. "It's not easy. There's tons of thoughts coming into your head."
Dimitrov saved two more match points in the same game before holding serve with a forehand winner to make it 9-9. Zemlja saved a break point to hold for 10-9, then broke in the next game to end the match in style with a curving forehand that flew past Dimitrov at the net.
Dimitrov converted just two out of 18 break points in the match, while Zemlja broke twice from 10 chances.
Despite predictions that he could be the next big thing in tennis, the 22-year-old Dimitrov has yet to make a breakthrough on the big stage. His best showing so far in a Grand Slam was a third-round appearance at last month's French Open.
"Things happen I guess for a reason," Dimitrov said. "But it's a good learning curve for me. I'm going to step out strong for the upcoming weeks."
"I think one of the toughest things you've got to face is your own expectations," he added. "I'm not worried about any of the comparisons, the talk, the things between the rivalries, whatever things are being said. I think that's just a very important thing to me in how I'm going to deal with my own pressure. It's my own business."