The world number one had looked in complete control, only for Cornet to come storming back and record a 1-6 6-3 6-4 victory.
The top seed came into her third-round match having only dropped five games in the tournament, and things looked to be going her way as she dominated the opening set.
After starting their match early in the afternoon, the players were forced off the pitch due to rain and eventually returned four hours later.
Resuming at 1-1, Williams blasted five consecutive games to take the lead.
Cornet, though, put that disappointment behind and produced the performance of her career.
It helped that Williams' form deserted her in the second, but that should not take anything away from Cornet, who was excellent at taking her chances against her illustrious opponent.
A string of unforced errors allowed Cornet to open up a 5-0 lead in the second and the frustrations began to build on the world's best player.
She made 11 errors, 29 in the match, to allow her French opponent hope and, although Williams improved towards the end, she was unable to stop Cornet levelling.
Both players appeared nervous in the deciding set, but, surprisingly, it was the normally unflappable Williams who failed to handle the pressure.
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