MADRID (AFP) - World No.1 Novak Djokovic was knocked out in the second round of the Madrid Open on Tuesday night as 21-year-old Grigor Dimitrov produced the performance of his career to date to win 7-6 (8/6), 6-7 (8/10), 6-3 in just over three hours.

Dimitrov took the first set in controversial circumstances as he benefited from an overrule when serving set-point down at 4-5 before eventually taking it on a tie-break.

The Bulgarian then fluffed a match point as the second set also went all the way to a tie-break, but regained his composure to break the Serb twice in the final set to seal it 6-3.

Djokovic had been heavily fancied to repeat his 2011 triumph in the Spanish capital after ending Rafael Nadal's eight-year reign on the clay of Monte Carlo a fortnight ago.

However, the Australian Open champion was troubled throughout by Dimitrov's powerful ground strokes in a match filled with controversy.

The game had gone with serve until 4-5 in the first-set when with Dimitrov set-point down he appeared to have fired long.

However, much to Djokovic's displeasure the chair umpire was summoned to examine the mark and ruled that the ball had indeed been in.

Dimitrov went onto hold and then broke Djokovic to serve for the set himself, but just as when the two met in Indian Wells earlier in the year, the World No.28 crumbled when trying to see out the opening set and Djokovic broke straight back.

The seven-time Grand Slam champion then took control of the tie-break and had two more set-points at 6-4, but Dimitrov this time hung in and opened up his own opportunity to take the set with a blistering forehand down the line at 6-6.

Djokovic could then only find the net on his return to hand the Bulgarian his first set in three meetings with the Serbian.

Dimitrov then moved to within touching distance of the match when he broke to move 4-2 ahead in the second.

However, there was even more drama to come as with Dimitrov serving at 15-40 in the next game, Djokovic rolled the right ankle he injured when playing for Serbia in the Davis Cup against the USA last month.

Much to the crowd's chagrin the trainer was called and after a significant stoppage, Djokovic broke straight back.

Amazingly Dimitrov then pulled up with cramp when serving at 5-5 but Djokovic somehow missed with a completely open court to aim into and Dimitrov held on to guarantee himself a second tie-break.

Djokovic again got the mini-break in the tie-break to move 5-2 in front, but handed it back when he fired long at 5-4.

Dimitrov then had his first match point at 7-6 but put a return into the middle of the net and after Dimitrov hooked an easy backhand into the tramlines at 8-8, Djokovic eventually took the match into a deciding set.

Dimitrov wouldn't be deterred though and broke straight away at the start.

And the man nicknamed "baby Federer" for his likeness to the 17-time Grand Slam champion then served out to 5-3 before breaking again in the final game to seal by far the biggest win of his career to date.