The current world No.1 was last in action for the Dubai Tennis Championship in February, and after two months out, he endured a frustrating return to the sport in Monaco.
He suffered a 6-3 6-7(7) 6-1 defeat to 22-year-old Alejandro Davidovich Fokina in the round of 32, as he failed to shake the rust from his inactivity.
Djokovic's refusal to be vaccinated has meant that he has not been allowed to compete in many tournaments this year, but with the Covid-19 rules in Monaco allowing him to participate, his return was highly anticipated.
But the 34-year-old Serb has never performed to his best on clay, and his weaknesses were on show during the Tuesday afternoon showdown.
His slow start was punished by Davidovich Fokina, who raced in to the lead with a dominant first set.
Djokovic started to find rhythm in the second, but the promising Spaniard continued to challenge him in every game, taking the pair to a dramatic tie-break.
However, Davidovich Fokina wasn't able to win in straight sets, with Djokovic edging a nervy tie-break on the Court Rainier III.
But despite momentum seemingly switching to Djokovic's favour, the 20-time Grand Slam winner allowed errors to creep into his game during the third and deciding set.
Five double faults hindered his rhythm as Davidovich Fokina began to pile on the pressure. Djokovic fought to the end, taking the final game to a deuce and denying his opponent two match points, but he eventually fell to defeat.
With Daniil Medvedev following closely behind in the rankings, Djokovic's No.1 crown will be at risk if the Serbian doesn't improve quickly.
He's expected to take part in the French Open, with the Grand Slam scheduled to start on May 22, but if his clay struggles continue, Medvedev could soon reclaim top spot.