Williams looked the likely winner when she dominated the second-set tiebreak to level up Friday's third-round encounter.

But it was the Chinese No.1 who played the bigger points better in the final set to win 6-4 6-7 (2-7) 7-5.

It extended the American great's major drought to three full years as she remained one behind Margaret Court on the list of overall grand slam victories.

"I definitely do believe (I can win more majors) or I wouldn't be on tour," said the seven-times champion.

"I don't play just to have fun. To lose is really not fun, to play to lose, personally.

"I seem to do well the last two slams of the year ... I have won them all several times.

"Each one is definitely an opportunity for me to go out there and win.

"But it's not even about the slams, it's about just me playing good tennis, and I didn't do that today.

"That is more disappointing."

The 38-year-old Williams made 56 unforced errors compared to just 20 from Wang.

It was a far cry from the pair's previous meeting in last year's US Open quarter-finals when Williams prevailed 6-1 6-0 in just 45 minutes.

"Personally I made a lot of errors," said Williams, who arrived in Melbourne brimming with confidence after snapping a three-year title drought at the Auckland Open earlier this month.

"I didn't hit any of those shots in New York or in general in a really long time, so that's good news.

"I just made far too many errors to be a professional athlete today."

The only time Williams was able to break Wang was during her best period of the match late in the second set, while she dropped her own serve on three occasions.

"She served well and I didn't return like Serena," said the American.

"If we were just honest with ourselves, it's all on my shoulders.

"I lost that match. So it is what it is.

"Like I said, it's not about the tournament. It's just like I can't play like that.

"I literally can't do that again.

"That's unprofessional. It's not cool."

Australian Associated Press