It marked the first time the winner and runner-up from the previous World Cup had both failed to reach the second round and stunned four times winners Italy who looked shameful and shell-shocked after their miserable tournament.
Both European giants finished bottom in their groups.
Slovakia, appearing for the first time as an independent nation, stunned the ageing Azzurri 3-2 to reach the second round together with Paraguay in Group F.
Japan scored a convincing 3-1 win against Denmark in the highest-scoring day of the World Cup so far, with the net bulging 12 times.
Japan, looking the best Asian team, joined Netherlands as the qualifiers from Group E. Cameroon were already out but got a consolation goal before being beaten 2-1 by the Dutch.
The Slovaks danced for joy after a thrilling end-to-end match while the Italians, many too old to play in another World Cup, fell to their knees.
Striker Robert Vittek scored in both halves for Slovakia, and Kamil Kopunek added the third in the 89th minute.
"We played with our hearts and that's what decided the match today," Vittek said. "We couldn't have dreamt about this."
A shadow of the side that lifted the trophy in 2006, Italy staged a late fight-back but lacked enough punch in front of goal.
LIPPI'S FAREWELL
The defeat brought a sad end to Marcello Lippi's time as Italy coach and the international careers of captain Fabio Cannavaro and gritty midfielder Gennaro Gattuso.
The performance of 36-year-old Cannavaro, their hero in 2006 but well off the pace here, summed up the decline of the team.
Lippi was persistently attacked by the Italian press before the World Cup for relying too much on the old guard and was quick to admit his mistakes.
"If a team turns up at such an important game like tonight with terror in their heart and their legs and is unable to express its ability, it's because the coach didn't train the team as he should," the ashen-faced coach said.
Gattuso joined the self-condemnation. "When we won the World Cup we all got given national medals of honour. Now they'll give us medals of shame, which is right," he told reporters.
Paraguay did not show the fire and flair that has characterised Latin American teams so far but their 0-0 draw with New Zealand was enough to leave them top of the group.
The All Whites exit with heads high after three draws in a World Cup where many had forecast they would be whipping boys.
"A lot of people thought we shouldn't be here and that we had amateurs who were not up to it," said coach Ricki Herbert. "But I think that's dead and buried now."
Italy's failure, including two draws prior to Thursday's loss, follows the spectacular flop of 2006 runners-up France.
France's team arrived home on Thursday with a heavy police guard to national disgust at both their miserable performance and an unseemly players' revolt.
