There were also defeats for Gustavo Kuerten of Brazil and Argentina's Agustin Calleri, the other two seeds in action, while Russians Marat Safin and Yevgeny Kafelnikov both lost to Swedish opposition and Tim Henman went down to the American Mardy Fish.
The best tennis of the day came in the final match up on centre-court, with Lopez edging out Philippoussis to strengthen his claims for a place in Spain's Davis Cup squad for the final against Australia later this year.
After two tight sets, Lopez made the crucial break in game eight to take a 5-3 lead, Philippoussis sending a backhand pass well wide on break-point.
Lopez then held serve confidently to complete victory in one hour 48 minutes and set up a third round match against either Carlos Moya or Gaston Gaudio.
Nicolas Massu of Chile had earlier upset 13th seed Gustavo Kuerten 6-3 7-5 to set up a potential third-round clash with American second seed Andy Roddick, who plays his first match in the tournament against Max Mirnyi of Belarus on Wednesday.
Kuerten, the three-times French Open champion, outserved his opponent on centre-court but paid the price for a series of errors on crucial points.
"I couldn't make the right shots in the first set," Kuerten complained. "I was nervous... I had the chance to win the second set at 5-4 ahead but I made errors."
In the last match on court one, Calleri, seeded 12th, lost to the American Vincent Spadea 7-6 3-6 6-3.
CLEAR CHANCES
Safin had ample opportunities to win his first-round match against Jonas Bjorkman but his hopes of a first ATP Tour win since April were dashed by his more consistent opponent, who came from a set and a break down to win 4-6 7-5 6-4.
Safin, who has now lost all three of his matches since returning from a series of injuries, clinched the first set and moved confidently into a 2-0 lead in the second.
He became upset at a series of foot-fault calls, however, and Bjorkman capitalised on his loss of service rhythm to come back and level after a set lasting 68 minutes.
Bjorkman was a model of consistency in the decider and snatched victory in game 10, as Safin, serving at 4-5 down, put a forehand drive long on match-point.
Bjorkman's compatriot Thomas Enqvist had an easier route through against Kafelnikov, who was forced to retire after losing the first set 6-3.
The Swedes were joined in the second round by Fish, who outpunched Henman 7-6 6-3, with the Briton finding none of the form that marked his run to the semi-finals in Vienna.
