The 20-year-old Slovakian Cepelova shocked defending champion Williams 6-4, 6-4 in a second-round match at the clay court tournament in Charleston.
The 17-time Grand Slam winner Williams complained about being mentally fatigued after the 84 minute contest.
“I am really just dead,” said the 32-year-old American. “I need some weeks off where I don’t think about tennis and can kind of regroup. I’ve had a long couple of years.”
Williams, who won this event in 2013, 2012 and 2008, also had her 15-match tour win streak snapped.
Williams was fresh off winning her sixth Miami title and 59th singles crown after beating world No. 2 Li Na, of China, on the weekend.
“I actually made the turnaround really good,” Williams said. “Obviously things didn’t go great out there.”
Unseeded Cepelova, who appears to be headed for a breakout year, was facing Williams for the first time. Cepelova won 55 percent of her first serves and 71 of 136 total points.
She advances to face Elena Vesnina of Russia, who beat another Slovakian, Anna Schmiedlova, 6-2, 6-1.
Williams, 32, blasted four aces but committed three double faults. She won just 12 of 28 points on her second serve.
“I really knew nothing about her game going into the match,” Williams said. “She was a great counterpuncher. She played the best she can play.”