The 21-year-old has now defeated all the “Big Three” this year – Djokovic, Roger Federer and Rafael Nadal – and faces another major talent in his Saturday semi-final against 23-year-old Daniil Medvedev.
He recovered from losing the opening three games in just seven minutes to shock the reigning champion 3-6, 7-5, 6-3.
Tsitsipas sealed the deal with a gleeful smash and held both arms aloft, while Djokovic met his opponent with a warm embrace at the net.
“He deserved the victory, he was the better player,” said the 32-year-old Serbian, who had looked imperious up until now.
“Second and third set I started off very well, but then I wasn’t sharp.
“I lacked that little bit of dynamic movement and acceleration in my shots.
“I didn’t have any breakpoints for two sets. I mean, he did serve well, credit to him, but just wasn’t pleased with the way I played.”
Asked if the seventh-ranked Tsitsipas has the potential to be number one, Djokovic replied: “He definitely has, yes.”
After a dreadful start, Tsitsipas found his feet in the second set, winning on a tie break, then went 3-1 up in the decider when Djokovic planted his forehand wide on the third break point.
It was a double celebration for the young Greek, who has also confirmed his place in the prestigious season-ending ATP Finals.
He did so after fourth-ranked Medvedev tamed self-styled “wild horse” Fabio Fognini 6-3, 7-6 (7/4) to canter into the semi-finals. Fognini was vying for a place at the Finals.
Djokovic said that he is fully recovered from a shoulder injury.
He did not drop a set in winning the title in Tokyo and had carried that ominous form into Shanghai – until he came across Tsitsipas.
Medvedev – another of the next generation – sent down 12 aces to help see off Fognini and said: “I don’t know what happened, my serve was crushing it.”
The Russian has a 12-0 record in quarter-finals this year and Djokovic this week described him as “very complete” player.
Federer, the 20-time Grand Slam champion, faces young German Alexander Zverev later Friday in his quarter-final.
The other match is between Austria’s Dominic Thiem, who beat Tsitsipas to the China Open title on Sunday, and Italy’s Matteo Berrettini.