The world no.2 and two-time champion lost to no.4 seed Rafael Nadal 2-6, 4-6 in one hour and 38 minutes.
Kei’s withdrawal sends the defending champion into last 4 where he will face Rafael Nadal (ESP, 4).
Novak recorded a 6-4, 7-5 victory over Feliciano Lopez in one hour and 33 minutes on Thursday.
Nole goes on to play Feliciano Lopez (ESP, H2H 8-1) in the last 16 on Thursday.
The 2011 and 2016 champion will open campaign at La Caja Mágica in R2 against Spanish wild card Nicolas Almagro (ATP #76).
Djokovic earned his 300th ATP World Tour Masters 1000 victory, beating no.31 seed Juan Martin del Potro 7-5, 4-6, 6-1.
The defending champion goes on to face no.31 seed Juan Martin del Potro for a place in the ATP Masters 1000 event last 16.
Wildcard Denis Istomin prevailed in five grinding sets after four hours and 48 minutes of play at Rod Laver Arena on Thursday.
The defending champion passed a tough first-round assignment with a 6-1, 7-6, 6-2 victory over Spaniard Fernando Verdasco (ATP #40).
Second seed and six-time defending champion will open campaign in his 13th Australian Open appearance against world no.40 Fernando Verdasco.