Made favourite for the title after the first round defeats of the world's top two, Rory McIlroy and Tiger Woods, third seed and 2011 winner Donald was crushed 7&6 by unheralded Scott Piercy.
With Justin Rose and Louis Oosthuizen also bowing out eighth seed Bubba Watson is now the highest-ranked player left in - and he had to go to the fourth extra hole to get the better of Ryder Cup team-mate Jim Furyk.
Also still alive, though, are 2010 champion Ian Poulter, McIlroy's conqueror Shane Lowry - only playing because Phil Mickelson and Brandt Snedeker pulled out - and Graeme McDowell.
The two Irishmen play each other next, while Poulter takes on South African Tim Clark in the first of two rounds now scheduled for Saturday following the delays caused by the freakish snowstorm earlier in the week.
American Piercy, who has made it to 37th in the world with hardly anybody noticing, sank his four-iron approach to the fifth for an eagle two and turned in a marvellous six under par 30.
"Scott played very well, I played just very average," Donald said.
"I need to drive it well around this course. There's a few forced carries out there and probably I didn't drive it well enough to put any pressure on Scott.
"But he was seven under through 12 and just playing extremely solid.
"I had a few opportunities on the greens, but for whatever reason I was just not making the putts and hence I'm going home."
Poulter, who lifted the trophy three years ago, was almost as impressive as Piercy as he made it through to the last 16 with a 3&1 victory over another of the home contingent in Bo Van Pelt, but fifth seed Rose lost 3&2 to Ryder Cup colleague Nicolas Colsaerts.
Lowry followed up his notable scalping of world number one McIlroy by thrashing Carl Pettersson 6&5, while McDowell, having knocked out Padraig Harrington, beat another Swede, Alex Noren, at the 20th.
The Ulsterman was one down with one to play, but fired in a brilliant approach to four feet and won after his opponent strayed into the desert trying to reach the green on the par five second in two.
A delighted Lowry said: "I scraped the win against Rory and my iron play was a lot better. I put pressure on him the whole game.
"I wish every week was match play - I enjoy the head-to-head."
Donald, who returned from a long winter break only last week, had beaten German Marcel Siem with two closing birdies, but gave Piercy just the encouragement he perhaps needed by setting off again with a double bogey six.
The English star could never have expected to be six down by the so-called halfway point, though, and yet another birdie by Piercy on the short 12th finished things off.
Poulter, unbeaten hero of Europe's triumph in Chicago last September and with match play crowns to his name on both sides of the Atlantic, has shown no ill-effects of taking six weeks off coming into the tournament.
"It feels pretty good," he said. "It was always a little risky taking that amount of time off, but it's working out pretty well.
"I worked hard at home, put some new irons in the bag and I couldn't be any fresher or fitter than I am right now.
"I didn't make any silly mistakes and I guess making seven birdies you are going to be tough to beat."
A Colsaerts victory was not that big a surprise in truth. The Belgian won the Volvo World Match Play in Spain last year, had eight birdies and an eagle in his first-ever Ryder Cup game and began this week with a crushing 5&4 win over American Bill Haas.
Rose actually won the first hole, but he could not match his big-hitting opponent's birdie on the long second and by the seventh was already three down.
A birdie at the ninth and eagle on the 11th - both with 14-foot putts - hinted at a comeback, but the Englishman plugged his ball in a bunker on the next and Colsaerts hit his approach to two feet at the 14th.
The 15th was halved in birdie threes - Colsaerts drove the green on the par four - and it ended on the following green when Rose three-putted.
IAmerican Ryder Cup player Matt Kuchar is next up for Colsaerts.