Goldstein, who was playing only his 10th match on the men's tour since turning professional last autumn, triumphed 6-4, 7-6, 6-7, 6-2 in a game lasting a minute under three hours. Even in the set Rusedski won he needed eight set points - it went to 11-9 in the tie-break - and against a player he said was among the best returners of serve he had ever faced, the 25-year-old made a ghastly total of 76 unforced errors.
It was Rusedski's third defeat in four matches so far this year and he lamented, "Maybe I should have done what Pete did - just stay at home. I think it was a good play for him to do that. He was so burned out he needed a rest and this is the toughest Grand Slam to get ready for.
"At the moment it hurts because this was a good opportunity the way the draw was panning out but maybe, in retrospect, it will prove good for me. I'm very disappointed but I couldn't raise my game to the level I had to and he returned unbelievably well. He challenged me every single point and I was not up to the task.
"I got only 51 per cent of my first serves in and against a player with his quality of return you have to be up at about 60 per cent at least."
The 22-year-old Goldstein graduated from Stanford University in California last summer - he was a fellow student of Tiger Woods - and at the US Open in September took a set off Sampras. Rusedski watched that match but still was not quite prepared for yesterday's display.
"I dug out some balls he was not expecting and created some angles,": Goldstein said. "He was a little bit frustrated, but he was real gracious in defeat and I appreciate that. He showed a lot of class.
"Greg is one of the top two or three servers in the game, but I went in with a fair bit of confidence."
Rusedski's frustration was apparent to everyone when he missed his second set-point chance at 5-4 in the second set. He angrily smashed the ball down the other end of the court, almost hitting a line judge, and was given a warning.
After eventually levelling, the third set went with serve into another tie-breaker. Goldstein won that 7-5 with a double-handed winner which flashed across Rusedski from the backhand wing and, with his tail up, he hit three more to break in the opening game of the fourth set.
At that Rusedski slung his racket away and it was hardly worth retrieving. He was broken again for 4-1 and virtually gave up. He did save two match points but on a third he hit a smash way over the baseline.
John McEnroe came through the qualifying to reach the Wimbledon semi- finals in 1977 - when he was aged 18 - but Goldstein may have to beat the 10th seed, Yevgeny Kafelnikov, and 15th seed Todd Martin in addition to Andrei Pavel to progress that far.
There was disappointment for the home crowd when the 17-year-old prodigy Lleyton Hewitt, conqueror of the 13th- seeded Frenchman, Cedric Pioline, in the first round, went out in four sets to Tommy Haas. Hewitt won the first set and had the German 4-2 in the second before Haas came back and wore down the Australian.
"It was a big disappointment because there was an opportunity there to make the third round of a Grand Slam - and there's no seeds in my section either," Hewitt said.
"I play my best tennis when I'm pumped. Today I lost some emotion at the end. I couldn't stay pumped for the whole match and I think it showed in the end."
In the women's singles, Anna Kournikova advanced in a match littered with unforced errors. To groans from the crowd, the 18-year-old Russian racked up an astonishing 31 double faults in overcoming Miho Saeki of Japan.
Time appears to be catching up on Arantxa Sanchez-Vicario. The No 4 seed ran up against the electrifying Austrian prospect Barbara Schett, whose power play unplugged the Spaniard's challenge.
Results, Digest, page 27; Goldstein's graduation, page 22