The six times world champion became yet another big name victim at a tournament which has proved a graveyard for the game's leading lights when he was edged out 5-4 by Harold.
"I struggled all night and couldn't get going," said Hendry, who has now lost four of his nine encounters with Harold, even though the Stoke player has won only one trophy in seven years as a professional came - the 1993 Asian Open in Bangkok.
Despite a string of early errors - particularly in the long potting department - Hendry looked to have weathered the storm when he established a 4-3 lead. But Harold, who beat him at the corresponding stage of the 1994 Grand Prix in Derby, refused to surrender.
His 58 break to start the eighth frame guaranteed a 4-4 scoreline before Hendry committed a glaring blunder in the decider, which will haunt him for some time. Having forced a safety misjudgement from Harold, Hendry scored only eight points before stunning the crowd by missing a bread and butter black from short range. Harold kept his nerve under growing tension to construct a 63 break and Hendry could not repair the damage.
The disgusted Scot, who had been attempting to win the event for a record fifth time, said: "Until I stop that kind of miss I won't be winning any more titles. It's really frustrating because in the last frame I couldn't have wished for the balls to be in a better position. What I did was absolutely pathetic."
After outlasting Hendry in the 3hr 29min marathon, Harold's reward is a semi-final against Stephen Lee, who is the only member of the game's elite top 16 to qualify for the semi-finals.
Harold said: "I felt really nervous towards the end and I honestly didn't fancy potting a single ball in the final frame. To beat Stephen in anything, anywhere, is a great feeling and to do it in an important tournament like this makes it even better."
In the other semi-final, Marco Fu, the sensation from Hong Kong, will take on the methodical Scot Chris Small, who beat fellow countryman Jamie Burnett 5-3 during the afternoon.
The dour 25-year-old from Edinburgh coped admirably with the tension of an important match against Burnett, with the exception of one glaring blunder. After snatching two scrappy frames on the blue and two others much more convincingly with breaks of 97 and 65, Small led 4-2. Ahead 18-0 in the seventh frame, though, and with the reds invitingly spread for a match-clinching break, Small left a straightforward black off the spot in the jaws of a pocket.
Burnett took advantage by constructing a 48 break to reduce his arrears to 4-3, but Small committed no such mistakes in frame seven and, with a late contribution of 45, he eased his passage into the last four.