Naomi Broady was denied a career-best win when world number 20 Shuai Peng battled back to beat her in three sets at the Aegon Classic in Birmingham.
The big-serving 21-year-old from Stockport lost the first set but fought back to take the second in a tie-break and led Shuai 3-0 in the final set.
But the Chinese player broke back and went on to win 6-2 6-7 (7-5) 7-6 (7-2).
A win for Broady would have set up an all-British clash in round three with Heather Watson, who beat Misaki Doi.
Watson was far too strong for her Japanese opponent, who is ranked 30 places below her at number 133, triumphing 6-2 6-4.
Broady can take consolation from her impressive first-round victory over emerging French player Caroline Garcia earlier in the week and, like Watson, she has a guaranteed place in the first round at Wimbledon through her wildcard.
Elsewhere at Edgbaston, second seed and former world number one Ana Ivanovic reached round three after thrashing Georgia's Anna Tatishvili 6-1 6-0, while fourth seed Daniela Hantuchova brushed aside Romania's Sorana Cirstea 6-0 6-3.
In the Aegon Challenge in Nottingham, British duo Anne Keothavong and Elena Baltacha both won through their first-round matches.
Baltacha, Britain's number one, saw off Ukraine's Tatiana Luzhanska 6-3 6-4 while Keothavong beat Russia's Regina Kulikov 6-0 7-6 (7-2).
Keothavong, who lost in the second round at the Aegon Trophy last week, said: "My game's getting there. Last week I felt a little bit underprepared after the change from clay to grass, but I'm playing my way in and the plan is to have lots of matches on grass under my belt before Wimbledon.
"In the first set I was pretty much faultless so if I could play more like that then things would be great."
Baltacha, who like Watson reached the second round of the French Open, added: "I'm delighted with my start to the grass-court season. I felt I played a solid match and it feels fantastic to be back on the grass again.
"There's nothing like playing at home at this time of year. Hopefully I've set the tone for the rest of grass-court season."