The 23-year-old German was the first to steal a set from Serena all tournament, and she became the first woman to defeat Williams in the past 34 matches.
Following the match, Lisicki was so overwhelmed that she began to cry.
"I'm so happy," she said between tears to BBC. "Serena played a fantastic match. She's such a tough opponent. It's just an amazing feeling to win this match. The crowd was so amazing."
Lisicki stole the first set 6-2, then after dropping nine straight games throughout the second and third sets, battled the world's No. 1 to steal the final set, 6-4.
"She played some unbelievable shots and I was just fighting for every single point and just hanging in there," Lisicki said, who improved to 4-0 against reigning French Open title winners.
The loss ended Williams' hopes of defending her Wimbledon crown and attaining her sixth tournament title.
Williams owned the loss after the match, saying that she simply failed to capitalize.
"I definitely had my opportunities, and I didn't take them. I definitely feel like I try at some points and then maybe I backed off a little bit at some points," she said. "I just have to know that going forward, if I want to be successful, if I plan on being successful, I'm never gonna do it backing off."
Lisicki isn't new to stunning upsets at Wimbledon. The German is 6-4 against top-10 opponents all-time at Wimbledon's All England Club.
Her lone win against a world No. 1 came last year in the fourth round at Wimbledon, when she defeated top-seed Maria Sharapova.
After so many of the top-seeded women were knocked out early, Lisicki posed one of the few remaining threats to Williams, capable of matching Williams' overwhelming power.
Williams showed little emotion throughout the match (aside from a menacing grimace) until the final set, the first such instance where the defending champion had faced any real resistance.
Throughout the first three rounds, Williams hadn't conceded more than three games to any of her opponents.
But down 3-0 in the final frame, Lisicki worked her way back with powerful returns and graceful drop shots, eventually tying the match at 4-4 before taking the final two games.
Lisicki will move on to face Estonia's Kaia Kanepi, No. 46 in the world, in the quarterfinals.
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