Rusedski missed a forehand that would have put him 3-0 up in the second set, and Ivanisevic stormed back to win six successive games.
Earlier in the day, the second seed had completed a 7-6, 0-6, 6-3 win over Spain's Emilio Alvarez in a match held over from the previous day when Rusedski led 3-2 in the final set.
The French Open champion, Gustavo Kuerten, overcame a second-set lapse to beat Hicham Arazi 6-1, 4-6, 6-2 and reach the quarter-finals.
Thomas Muster, a former French Open champion, also breezed into the quarter- finals, beating the German qualifier Jens Knippschild 6-1, 6-4 in 53 minutes, but the 1989 winner Michael Chang, the 11th seed, lost 6-3, 6-7, 6-2 to Francisco Clavet in a second-round match.
In a battle between two Spanish clay-court specialists, ninth seed Felix Mantilla staged an amazing comeback to beat Alberto Berasategui 1-6, 7-6, 7-6. Berasategui wasted 13 match points as he lost a 5-1 lead in the second set.Reuse content