Medvedev won the Paris title in 2020 but has not found the indoor tournament to his liking in recent years -- the defeat to Popyrin is the third successive time he has gone out in his opening round.
Popyrin, who has been in a rich vein of form this year winning his first Masters tournament in Montreal in August and beating Novak Djokovic in the US Open, edged Medvedev 6-4, 2-6, 7-6 (7/4) in a gripping second round match.
For Popyrin, ranked 24 in the world, it was only his third win over a player in the top five.
"It is the first time I have beaten him (in four meetings)," said Popyrin, who will play the winner of the match between France's Giovanni Mpetshi Perricard and Karen Khachanov of Russia.
"We have had some right old battles in the past and it is a real pleasure to have performed like this this time round."
Medvedev, who has already qualified for the season-ending Masters, fought back twice in the deciding set.
He came back from 4-1 down to force a tie-break and then trailing 4-1 in that he levelled at 4-4.
However, with Popyrin leading 5-4, Medvedev double-faulted giving the 25-year-old Australian two match points and he wasted no time in sealing the victory on the first one.
'Still a contender'
Medvedev is not the first high profile seed to fall at the first hurdle as his compatriot Andrey Rublev and Norway's Casper Ruud have already lost.
"It was a tough match," said Medvedev.
"I should have played better but at the same time, I had my opportunities, and I did not take them.
"It was a very tight match."
Carlos Alcaraz remains in the mix having won his first match on Tuesday and is favoured to take the title after Italian world number one Jannik Sinner withdrew from the tournament due to an intestinal virus.
Alcaraz will play France's Ugo Humbert in the third round, the French number one breezed past America's Marcos Giron 6-3, 6-2 on Wednesday.
A potential dark horse for the title is Bulgarian eighth seed Grigor Dimitrov who beat Tomas Martin Etcheverry 6-7 (9/11), 6-3, 7-5.
Dimitrov still has a chance of qualifying for the Masters, if he won the Paris title he would move past Djokovic (sixth), Ruud (seventh) and Rublev (eighth).
Just the top eight qualify for the climax to the ATP season in Turin.
"I would give a lot to be in (Turin)," said Dimitrov, who reached the Paris final last year.
"I'm in a place where I am still a contender, I'm still fighting against the best players in the world, and still beating the younger guys.
"This gives me confidence and makes me happy."
Germany's world number three Alexander Zverev is already booked into Turin and begins his Paris campaign later on Wednesday against the Netherlands' Tallon Griekspoor.
