Thiem, the fifth seed, reached the French Open final for the second year running last month but his heavy topspin game is less effective on grass and Querrey took full advantage to win 6-7(4) 7-6(1) 6-3 6-0.
The big-serving Querrey, who reached the semi-finals in 2017 and also beat Novak Djokovic in the third round in 2016, fired down 22 aces as he turned the match around.
Thiem lost heart in the deciding set which whizzed by in 20 minutes, Querrey finishing him off with another ace.
He is the third top-10 player to fall in the men's first round after sixth seed Alexander Zverev and seventh seed Stefanos Tsitsipas bowed out on Monday.
The result was all the more impressive for Querrey who only returned to action at Eastbourne last week, reaching the final, after being sidelined by injury since April.
"I know grass is not his favourite surface but he is still a great player who reached the French Open final a few weeks ago so I felt like the pressure was on him," Querrey, who will face Cristian Garin or Andrey Rublev next, said.
"It meant I could swing freely."
(Reporting by Martyn Herman; Editing by Ken Ferris)
