Palma - Andy Murray suffered a setback in his return from injury as he slipped to a surprise last-16 loss to world No 240 Matteo Viola at the second-tier Challenger event in Mallorca on Thursday.
The three-time Grand Slam champion, returning after hip surgery, was beaten 3-6, 6-4, 7-6 (7/3) by his Italian opponent.
Murray was competing in a Challenger tournament for the first time since 2005 and had cruised through his opening two matches at the Rafa Nadal Open in straight sets.
A third consecutive such victory looked on the cards when he took the opening set with two breaks of the Viola serve, but he dropped the second despite twice fighting back from a break down.
The former world number one again recovered an early break in the decider, but lost a tie-break on Viola's second match point.
The 32-year-old, currently ranked 328th in the world, had a metal hip implanted in January and pulled out of the doubles at the ongoing US Open in order to concentrate on his singles comeback.
Murray had suffered back-to-back first-round losses on the ATP Tour earlier this month - against Richard Gasquet in Cincinnati and Tennys Sandgren in Winston-Salem.