Osaka, who is the US and Australian Open champion, has seven hardcourt titles in her kitty but has never lifted a clay court trophy.
She played her first clay-court tournament since the 2019 French Open and also did beat Misaki Doi in the first round. She also made her top 20 debuts this week.
Muchova reached the last four in Melbourne Open this year and used a single break of serve to dominate the first set against the world No.1 tennis player.
Osaka, who was also a quarter-finalist in the same tournament two years ago, lost the second round and the score read 3-1 but went on to win the next five games which ultimately lead to a decider.
Muchova regained the momentum and defeated Osaka early in the third round, as the score read 5-1 and went on to win the match in just two hours.
Karolina Muchova will face the Greek tennis player Maria Sakkari or Estonia’s Anett Kontaveit for a berth in the quarter-finals of the tournament.