Defeat left the Saudis facing an early exit from the competition for the first time after making the last five finals.
Plucky Iraq struck a blow for their war-torn country with a dramatic 3-2 win over Turkmenistan in Chengdu that kept alive their chances of advancing to the last eight.
But it was Uzbekistan who stole the headlines as striker Alexander Geynrikh lashed in a 13th-minute winner from 30 metres to stun Saudi Arabia, who needed a good result after a 2-2 draw with Turkmenistan at the weekend.
The Saudis, who won the Asian Cup at the first attempt in 1984 and again in 1988 and 1996, turned on the pressure in the second half as they went in search of the equaliser.
Defender Saod Al Kaebari hit the bar with a dipping long-range effort in the 51st minute and Hamad Al Montashari came close moments later.
In the 85th minute, substitute Abdulrahman Al Bishi somehow headed wide from point-blank range.
But Uzbekistan, who beat Iraq 1-0 in their opening match, held on to reach the quarter-finals for the first time and complete a remarkable turnaround for the former Soviet republic.
They were easily the worst team at the last Asian Cup in Lebanon four years ago when they were demolished 8-1 by eventual winners Japan and 5-0 by runners-up Saudi Arabia.
UNDER PRESSURE
Dutchman Gerard van der Lem, who is the 13th man to coach Saudi Arabia since 1994, will be under intense pressure before their crunch game against Iraq on Monday.
Iraq, who have overcome severe hardship to qualify for the Asian Cup, survived a late onslaught from Turkmenistan to revive their challenge.
Midfielder Qusay Munir pounced in the 88th minute, giving Iraq a morale-boosting victory after years of being terrorised by Uday Hussein, the son of toppled ruler Saddam.
Their German coach Bernd Stange quit in the build-up to the Asian Cup, fearing for his life amidst the escalating violence in Iraq.
However, substitute midfielder Nashat Akram boldly predicted that Iraq could go on to reach the semi-finals.
"We are getting better and better every game," he said. "We had hundreds of chances to score but the pressure got to us. Now we are out of the pressure zone and can reach the semi-finals."
