The 2005 winner suffered a final-frame loss, going down 10-9 to world No 51 Jamie Jones in Sheffield.
After world No 1 and defending champion Mark Selby crashed out in the opening round, former Rotherham cueman Murphy quickly followed against the 30-year-old Welshman.
Murphy had looked in control at 8-5 – following century breaks of 101 and 102 – but a mid-session break gave Jones time to regroup beforeing clinch a second-round tie with Kyren Wilson.
Jones had to come through three qualifying rounds just to reach the Crucible where he has history having reached the quarter-finals previously.
“I think this is my best victory,” said Jones. “I’ve never faced pressure like I felt (yesterday).
“I’ve played plenty of deciders, but there’s pressure at the Crucible in frame one, never mind the decider.
“So to come through having held myself together is very pleasing. It’s all about momentum. If the interval hadn’t come at 8-5, I think Shaun might have pulled away.”
Murphy said: “I must give Jamie full credit because when he sets foot into the Yorkshire borders there seems to be this weird change in him.
“That’s not me being critical, but if I was in his team I’d be trying to work out what happens to make him play far better here than he generally does elsewhere. If he can play like here then he should be higher up the rankings than he is.
“I’m just pleased I won this tournament in 2005 when I didn’t know what I was doing and had no battle scars and didn’t understand fear. I’m a bit older now and a bit more frightened.”
There was no early drama for Mark Allen, who saw off Crucible debutant Liam Highfield 10-5 to move into the second round.
The Masters champion turned his 6-3 overnight lead into a relatively straightforward victory even though Highfield produced a 99 break in yesterday’s first frame.
Allen then rattled through the next three frames including a seventh half-century break as he secured the win.
The 32-year-old will meet Joe Perry in the second round after the world No 22 pulled off a shock victory over Selby.
“I didn’t score as heavily as I would have liked but I did enough to win,” Allen said.
“It was a good match even though it was not the most free-flowing. Liam pushed me all the way and there were lots of close frames.”
Highfield admitted a missed brown in the second frame of the day proved the turning point in his defeat.
“The brown was really tough and, had that gone in, then maybe it would have been 6-5 and a different match,” Highfield said.
Ding Junhui resumes this morning with a 6-3 lead over fellow Chinese potter Xiao Guodong. Both players live in Sheffield – training at the city’s Star Academy – and 2016 finalist Ding trailed 2-0 after the opening exchanges.
But he battled back to win six of the next seven frames with breaks of 68, 124, 57 and 72.
Grimsby’s Stuart Carrington looked set for a late-night finish, trailing 8-7 against Barry Hawkins. Carrington was looking to be the fourth qualifier to reach the second round after top-16 player Marco Fu suffered a 10-5 exit to Lyu Haotian.
Welshman Mark Williams, who has climbed to seventh in the world rankings, starts his Crucible campaign today against qualifier Jimmy Robertson. He puts his resurgence down to working with coach Steve Feeney, whose SightRight coaching programme has given Williams a whole new outlook.
“I’m playing totally differently to how I’ve been doing it for many years, and I wish I went to see them about five years ago,” he said. “I’m in a totally different position for every single shot that I play now compared to how I used to be.”