After both players spurned opportunities at the start of the decider, it was Daniel who made the first move by establishing a 4-1 advantage as Djokovic appeared to wilt in the Californian heat.
"Very weird. I mean, I just completely lost rhythm, everything". But at the same time, I just didn't feel good at all.
Djokovic - who benefited from a bye in the first round - relinquished a 5-2 lead in the first set and wound up committing 61 unforced errors.
Djokovic had four aces but overall he served poorly making four double faults and winning just 65 percent of his first-serve points.
Novak Djokovic struggled during his second-round match against Taro Daniel. Jayne Kamin Oncea Reuters
The match was tied 2-2 in the second set when it was halted Saturday.
Also, American Taylor Fritz defeated Fernando Verdasco of Spain, 4-6, 6-2, 7-6 (7/1), Croatia's Borna Coric breezed past Roberto Bautista 6-1, 6-3 and Pablo Carreno-Busta of Spain, stopped Russian Daniil Medvedev 6-1, 7-5.
"The plan wasn't to hit drop shots", Federer said.
Federer is making his 17th appearance in the California desert and is assured of remaining world No1 if he makes it to the semifinals.
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Seeded losers included Italian No. 16 Fabio Fognini, 4-6 7-6 (2) 6-4 against Jeremy Chardy of France, and Spaniard Albert Ramos-Vinolas, hammered 6-0 6-3 by young Croat Borna Coric.
Federer said he understands well how even a champion like Djokovic could be struggling to find his game so soon after having surgery.
Speaking to the media after the match, Djokovic said, "It felt like my first match on tour".
Roger Federer didn't rule out the clay season, at least not yet, he said yesterday at Indian Wells.
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"When you do come back from injury or when you haven't played in a long time, it just takes extra effort".
"I think that would be a major mistake by myself".
"But he's strong enough to deal with that, and I love him and I want to see him in the top positions very soon". "I really look forward to being back next year".
Britain's Kyle Edmund, who had been out of action with a hip injury since making the semi-finals at the Australian Open lost out to Israel's Dudi Sela.
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The Saints are beginning to realize it, too, along with the reality that this negotiation isn't going as smoothly as they hoped. Ian Rapoport of NFL Network reported several other "QB-needy" teams reached out to Condon to kick the tires on Brees.