Hopes were high that Murray could have another strong run in Melbourne when he ground out a five-set win over Nikoloz Basilashvili in round one, three years after it appeared his career had ended on the same court.
But, back on John Cain Arena, the feeling was very different this time as Murray struggled for sharpness against a tenacious and mobile opponent and fell to a 6-4 6-4 6-4 defeat.
Daniel had won just five games over three sets in their only previous meeting in Davis Cup in 2016 but Murray, whose heavy workload also included reaching the final of the ATP Tour event in Sydney at the weekend, began sluggishly and was unable to turn the tide in his favour.
He had never lost to a player ranked outside the top 100 at a slam, with then world number 91 Arnaud Clement the previous lowest in the second round of the US Open back in 2005.
At 28, Daniel has spent much of his career hovering around the 100 mark but it is an indication of the depth in the game that he is an extremely solid and capable player, and deceptively quick around the court.
Murray was unable to hit through his opponent during the opening set and, although he retrieved an early break, Daniel quickly secured another one.
Four break points came and went in the second game of the second set - Murray took only two of 11 in the match - and again it was Daniel that came up with the answers at the big moments.
Murray did finally move ahead early in the third but surrendered his advantage straight away and the end was nigh was Daniel broke to lead 5-4.
Murray received a warning for slamming his racket angrily to the court, and Daniel clinched his second match point to move through to the third round of a slam for the first time.