The 20-year-old missed last year’s event through injury and his shaky late-season form continued with a 6-7 (3) 6-3 6-4 loss in his opening round-robin match.
Alcaraz came from a break down to win the first set on a tie-break, but immediately fell behind in the second and it was Zverev who was the steadier from there on in a contest that featured some spectacular shots from both players.
The loss was a third in a row for Alcaraz, who was beaten by Grigor Dimitrov in the fourth round of the Shanghai Masters before a shock defeat to Roman Safiullin in his first match at the Paris Masters.
Zverev, a two-time former champion at the event, has surged back into form over the second half of the season following the ankle injury at the French Open last year that ruled him out for seven months.
He suffered a worrying moment in the third set when he went over on his ankle, but he played down any concerns afterwards, and said on Amazon Prime Video: “It’s always nice to beat the best players in the world and he’s definitely one of them. It’s special to win on this court again.”
Earlier, Britain’s Neal Skupski made a winning start to his campaign in the doubles with Dutch partner Wesley Koolhof.
The Wimbledon champions are playing in their final tournament together after Koolhof chose to end the hugely successful partnership.
They will look to go out on a high and comfortably defeated Australian duo Rinky Hijikata and Jason Kubler 6-3 6-4.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies