By Scarlett Elworthy and Mark Barden
BBC Sport at Wimbledon |
An early break earned Craybas a 2-0 lead. The pair then traded breaks over the next six games but Craybas held in the ninth to seal the first set 6-3.
The duo traded breaks twice in the second but though Williams edged ahead 5-6, Craybas forced the tie-break.
And the unseeded outsider took it 7-4 to reach round four for the first time.
Williams has recently been dogged by ankle problems and in mid-May she completely withdrew from the competitive scene and skipped the French Open.
She then returned at the start of last week after taking a late decision to tackle Wimbledon, but struggled through her first two matches against lowly-ranked players.
However, losing to unseeded Craybas was still tough for Williams to take and she had to wipe away tears in the press conference that following her defeat.
"I just didn't play well today," she said. "I didn't do anything right and I would have been better off staying at home to be honest.
"She just got balls back and didn't have to do anything exceptional - she pretty much had to show up.
"I am used to winning these kind of matches but it is hard when you go out there and you can't make a shot."
Venus Williams beat Daniela Hantuchova to go through to the fourth round.
The American former champion, seeded 14, won 7-5 6-3 but was made to battle by the Slovakian 20th seed.
The second set saw Hantuchova broken twice early on. She rallied with two breaks herself to level at 3-3 only for Williams to break again immediately.
She then held but Hantuchova's serve let her down once more under pressure in the next game to see Williams through.
MMIX
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