The 2008 champion slipped out 6-3, 6-7 (6/8), 6-4 in his first return to Queen’s Club in four years, owing to relaxed UK tax rules for overseas sports stars.
Nadal has talked of attacking Wimbledon now he is finally past all manner of knee problems, and arrived in west London after claiming the Mercedes Cup title at Stuttgart – his first on grass in five years.
The 29-year-old has already admitted this week “I was not surprised that I lost” to Novak Djokovic in the French Open quarter-finals, relinquishing the Roland Garros title for the first time since 2009.
That faltering form came back to haunt the 14-time Grand Slam champion, as despite leading the final set 4-2 Nadal was reined in and beaten for the second time in succession by his Ukrainian opponent.
Nadal saved a match point in the second-set tie-break and then looked ready to rally for victory, but was unable to hold his nerve.
Chelsea manager Jose Mourinho watched on as Nadal, who is a big fan of the Portuguese’s former club Real Madrid, was unable to sustain his fine start to the grass court campaign.
Nadal has not reached a Wimbledon quarter-final since 2011 when he finished runner-up at SW19, and will still aim to set his London record straight at the end of the month.
Dolgopolov will now face Guillermo Garcia-Lopez in second-round action at Queen’s.
At the Gerry Weber Open in Halle, Germany, second seed Kei Nishikori survived a battle against Austria’s Dominic Thiem to reach the second round.
The world number five from Japan faced nine break points in the first set but eventually pulled through 7-6, 7-5 to set up a clash with Germany’s Dustin Brown in the grass-court tournament.
World No 6 Tomas Berdych, the third seed, was also given a workout in his first-round match by 49th-ranked Victor Estrella Burgos of the Dominican Republic.
Playing under a closed roof due to rain, the first set was competitive but the Czech eventually eased through 7-5, 6-3.
There was no fairytale return for German veteran Tommy Haas. The 37-year-old, a two-time winner of the Halle tournament, is hoping to reignite his career after a shoulder injury, but was beaten 7-5, 6-2 by Italian Andreas Seppi.
Gael Monfils, the world No 16, was also victorious, beating Lukas Rosol of the Czech Republic 6-3, 6-4.