It was the world No 1's worst performance in Melbourne since she went out in the third round as a 14-year-old in 1984 and ended her run of 45 successive victories at the four major championships. Coetzer had also been responsible for terminating Graf's 32-match unbeaten tournament run in 1995.
The defeat leaves Graf unexpectedly available to attend the trial of her father, Peter, who is charged with evading taxes on her earnings. The prosecution has asked for a jail sentence of six years and nine months and the verdict is expected on Friday, a few hours before the women's final.
Graf did not speak to reporters after the match, but a statement said she had been treated for heat exhaustion and had also been suffering from an infected toe.
The top seed was the weightiest name to fall, but her compatriot, the fifth-seed Anke Huber, the third seed, Conchita Martinez, and the seventh seed, Lindsay Davenport, were also bundled out of the tournament on a day when the 40C temperature was described by Martinez as probably the most debilitating she had faced in her nine-year career. "We're all human," the Spaniard said. "It was really nasty out there. It could be dangerous, I don't know. That question is for a doctor."
The exodus of leading players left Martina Hingis as the only major seed left standing and the hot favourite to become the youngest Grand Slam champion in the history of professional tennis at the age of 16.
There are no top seeds left in the top half of the women's draw and Hingis already faced an easier time in the bottom half, where her greatest threat will come from either the eighth seed, Irina Spirlea of Romania, or the 15th seed, Chanda Rubin.
Graf, who had made hesitant starts throughout the first week of the tournament, was broken by Coetzer on her first two service games and lost the first set to the 12th-seeded South African 6-2. Graf built up a 4-0 lead in the second set before heat and injury took their toll.
The German paid tribute to Coetzer: "She played really well today. I tried everything I could, I tried as hard as I could. I just didn't have the energy with the heat. But give her credit, she handled the conditions really well."
Martinez appeared to be heading for an easy win against the 16th seed, Sabine Appelmans of Belgium, after winning the first set 6-2 and serving for the match at 5-4 in the second. Then she too collapsed, going down 2-6, 7-5, 6-1, in the most remarkable turnaround in the tournament.
Huber, who lost in the final last year to Monica Seles and who was beaten by Mary Pierce in the fourth round in 1995, was completely outclassed by Pierce again, losing 6-2 6-3.
Pierce has dropped only 11 games in her past three matches and the aggressive, athletic game which helped her to win this title two years ago seems to have returned.
Her form since that Melbourne triumph has, at best, been erratic and her best Grand Slam result was reaching the quarter-finals at Wimbledon last year. A troublesome shoulder injury also affected her training.
She has worked on her body, rested thoroughly and has had daily treatment on her shoulder. During one period she did not touch a tennis racket for three months.
"I feel fitter and I feel healthy and happy and I'm enjoying what I'm doing," Pierce, now 22, said. "And I feel every day I'm improving with every match."
Davenport was beaten by her unseeded compatriot Kimberly Po, 7-6, 6-4, in a tight match marked by a 15-13 first-set tie-break.
Graf's defeat ended the longest winning run in professional Grand Slam history, her extraordinary record of 45 victories in tennis's four major events dated back to a defeat in the US Open final in 1994 when she lost to Arantxa Sanchez Vicario.
The German had long eclipsed Margaret Smith Court's record of 35 consecutive Grand Slam victories.Reuse content