World number two Sabalenka was beaten 3-6, 6-4, 7-6(5) by Li, while Pegula, the second seed and last year's runner-up, squandered three match points before losing 2-6, 7-6(7), 6-3 to Ostapenko.
The double upset removed two of the tournament's leading contenders and opened up the draw ahead of the remaining rounds in Wuhan.
Ann Li stages dramatic comeback to eliminate Sabalenka
Sabalenka appeared on course for victory after taking the opening set 6-3 and moving into a 4-2 lead in the second.
However, Li responded strongly, winning four consecutive games to take the second set 6-4 and force a deciding set against the three-time Wuhan champion.
The American continued to challenge Sabalenka in the final set, capitalising on errors and putting pressure on the Belarusian's serve. Sabalenka, who had protective strapping around her right knee, requested medical attention after falling behind and appeared to struggle with her movement.
Li moved ahead in the deciding set before Sabalenka mounted a late recovery, saving several match points to remain in contention. The American eventually held her nerve in the deciding tie-break to complete a memorable 3-6, 6-4, 7-6(5) victory after two hours and 27 minutes.
The win was a major milestone for Li, who defeated Sabalenka for the first time in their meetings and recorded the biggest victory of her career against one of the leading players on the WTA Tour.
Ostapenko overturns Pegula's advantage
Pegula's exit was equally dramatic, as the American failed to convert three match points against Ostapenko.
The second seed made a strong start, taking the opening set 6-2 and moving within touching distance of victory. Ostapenko, however, refused to surrender and raised her level in a tense second-set tie-break.
The Latvian saved three match points before winning the tie-break 9-7 to level the contest at one set apiece.
With momentum on her side, Ostapenko dominated the deciding set to secure a 2-6, 7-6(7), 6-3 victory and end Pegula's campaign.
The result was particularly significant because Pegula had won her opening match at 22 consecutive WTA 1000 tournaments before the defeat, according to the tournament report.
Swiatek advances as the Wuhan draw opens up
While the leading seeds suffered setbacks, Iga Swiatek began her campaign with a convincing 6-2, 6-1 victory over fellow Pole Magdalena Frech.
The former world number one secured her 40th win of the season, strengthening her position as one of the leading contenders for the Wuhan title.
Sixth seed Karolina Muchova also progressed after surviving a demanding three-set contest against American qualifier Caty McNally, winning 3-6, 7-6(1), 7-6(4).
British player Sonay Kartal added to the day's surprises by defeating ninth seed Belinda Bencic 6-0, 7-5 to reach the next round.
With Sabalenka and Pegula eliminated, the competition has become more open, although Swiatek and the remaining seeded players still face a demanding path to the final.
What the defeats mean for Sabalenka and Pegula
Sabalenka's defeat extended a difficult spell after her third-round exit at the China Open earlier in October. The Belarusian had not won a title since March and had already lost the world number one ranking to Elena Rybakina.
The early exit also ended her hopes of claiming a fourth Wuhan singles title this year. She had previously won the tournament in 2018, 2019 and 2024.
Pegula's defeat was another major surprise, given her consistency at WTA 1000 events. Nevertheless, the American had already secured qualification for the season-ending WTA Finals, alongside compatriot Coco Gauff.
For Li and Ostapenko, the victories provide an opportunity to build momentum and pursue a deeper run at one of the final major events of the WTA season.
Wuhan Open results
• Ann Li: defeated Aryna Sabalenka 3-6, 6-4, 7-6(5)
• Jelena Ostapenko: defeated Jessica Pegula 2-6, 7-6(7), 6-3
• Iga Swiatek: defeated Magdalena Frech 6-2, 6-1
• Karolina Muchova: defeated Caty McNally 3-6, 7-6(1), 7-6(4)
• Sonay Kartal: defeated Belinda Bencic 6-0, 7-5
The 2026 Wuhan Open continues through 18 October in Wuhan, China, with the remaining players competing for the WTA 1000 title on outdoor hard courts.