Istomin, who sensationally knocked out six-times champion Novak Djokovic in the second round, laboured with a hip injury after taking the first set and 15th seed Dimitrov took full advantage on a scorching hot day at Margaret Court Arena.
The Bulgarian shook Istomin's hand warmly upon the win and might as well have.
After all, the 117th-ranked 30-year-old had paved a gold-bricked path by eliminating defending champion Novak Djokovic in the second round, giving Dimitrov his best hope of a grand slam semi-final since his dream run at Wimbledon in 2014.
Top seed Andy Murray, who thrashed Dimitrov in the fourth round at the U.S. Open, was also sent packing from the other half of the draw by Mischa Zverev on Sunday.
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"Obviously there's been a lot of talk going around those two guys exiting the tournament," said the 25-year-old Dimitrov, who will next meet 11th seed David Goffin.
"For sure, it's different... But in the same time we saw everyone can beat everyone."
Long touted as a player to trouble the 'Big Four' of men's tennis -- Djokovic, Murray, Rafa Nadal and Roger Federer -- Dimitrov earned the unwanted nickname 'Baby Fed' early in his career in a nod to the elegance of his groundstrokes.
His huge promise appeared set to be fulfilled after his breakout 2014 season, where he reached the quarter-finals at Melbourne Park before reaching the last four at Wimbledon.
But he has since suffered two lean seasons and been through a string of coaches before hiring Daniel Vallverdu, a former mentor to world number one Andy Murray and Czech Tomas Berdych, midway through 2016.
He has since enjoyed a mini-revival and upset top-10 players Kei Nishikori and Milos Raonic to win the warmup Brisbane International.
His hopes of continuing his run in Melbourne appeared in jeopardy for a time on Monday as Istomin raced through the first set.
But it all came apart for the Uzbek when his hip played up, an injury he has been troubled with throughout his career since he was hurt in a serious car accident when he was a teenager.
After losing the second set tie-break, Istomin took a medical time-out but his movement worsened as the match progressed and Dimitrov knew well enough to keep his opponent running.
After surrendering in two hours and 24 minutes, Istomin exited the court to a huge ovation from the terraces for grinding out the loss, an underdog whose upset of Melbourne Park maestro Djokovic will resonate for years.
Goffin, who became Belgium's first quarter-finalist at the tournament, also piled into the Djokovic hole after a 5-7 7-6(4) 6-2 6-2 win over Austrian eighth seed Dominic Thiem at Rod Laver Arena earlier in the day.
It was sweet revenge for Goffin, who lost to Thiem in the quarter-finals at Roland Garros last year and will now have a chance of reaching his maiden grand slam semi-final.
"It's just that I'm feeling more confident for the moment against top players," he said. "I knew that I was able to fight and to win some matches against big guys."
(Editing by Sudipto Ganguly)
