Halep, playing in her first tournament since a back injury cut short her 2018 season, lost 6-4 6-4 in 87 minutes with the result dealing a blow to her Australian Open preparations.
Australian Open
Five burning questions with 50 days to go until 2023 Australian Open
Australian Barty, who is ranked 15th in the world, fired 26 winners and won four out of seven break points as she recorded her first victory over a reigning world number one.
The 22-year-old Barty will play 10th seed Elise Mertens in the quarter-finals following the Belgian's 6-3 6-1 win over Estonian Anett Kontaveit.
Earlier on Wednesday, Mertens won 7-6 (4) 2-6 6-2 in her first-round match with Katerina Siniakova, while Kontaveit beat Monica Puig 2-6 7-5 6-1.
In the bottom half of the draw, defending champion Angelique Kerber faces a mouthwatering last-eight encounter against two-time Wimbledon champion Petra Kvitova.
Czech Kvitova, who won this tournament in 2015, battled past Su-wei Hsieh 7-6 (2) 6-2, with three-time grand slam champion Kerber already having beaten Italy’s Giorgi Camila in straight sets on Tuesday.
Fourth seed Sloane Stephens was knocked out by qualifier Yulia Putintseva after surrendering a one-set lead to lose 3-6 7-6 (4) 6-0.
Kiki Bertenes, seeded seventh, awaits Putintseva after she received a walkover win due to former world number one Garbine Muguruza suffering a gastrointestinal illness.
The other quarter-final will see qualifier Aliaksandra Sasnovich play Switzerland’s Timea Bacsinszky.
Belarusian Sasnovich defeated Priscilla Hon 0-6 6-3 6-3, while Bacsinszky also came from a set down to beat an Australian player, winning 5-7 6-4 6-3 against Sam Stosur.
At the Hobart International, France’s Alize Cornet remains on course to regain the title she won in 2016 after easing into the quarter-finals.
The sixth seed beat compatriot Pauline Parmentier 6-3 6-0 to set up a meeting with Belgian qualifier Greet Minnen, a 6-1 4-6 7-6 (3) winner against Magda Linette.
Seventh seed Kirsten Flipkens came from a set down to win 6-7 (3) 6-4 6-1 against Viktoria Kuzmova.
Unseeded American Sofia Kenin will be her last-eight opponent following her 7-6 (6) 6-3 success against Tunisian Ons Jabeur.
Elsewhere, Anna Karolina Schmiedlova beat eighth seed Alison van Uytvanck 6-3 6-2 and Irina-Camelia Begu defeated Anna Blinkova 4-6 7-6 (2) 6-2.
In Wednesday’s other matches, Belinda Bencic comfortably overcame Zoe Hives 6-2 6-4, while Dayana Yastremska claimed a 6-1 6-4 victory over Vera Lapko.
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