The Italian secured a straight-sets victory in one hour and 40 minutes, spoiling Zverev's first appearance as the newly crowned world number one.
Musetti, ranked 24th in the world, demonstrated excellent composure throughout the encounter, recording 29 winners and 12 unforced errors against the German's 25 winners and 21 unforced errors.
The opening set was closely contested, with both players holding their serves to force a tie-break. Zverev initially established a 5-2 advantage, but Musetti responded brilliantly, winning five consecutive points to take the set 7-6(5).
The Italian carried his momentum into the second set and broke Zverev's serve twice to establish complete control of the contest.
Zverev struggled to find answers to Musetti's attacking game and impressive backhand slices as the Italian moved closer to victory.
Musetti eventually sealed the second set 6-2, completing a significant victory over the top seed and booking his place in the last 16.
Zverev disappointed with performance
The defeat marked a disappointing beginning to Zverev's reign at the top of the ATP rankings, having officially become world number one on Monday.
The German admitted that his opponent was the better player on the day and was critical of his own performance.
"To simplify it, he played really good and I played really bad," Zverev said after the match.
He also expressed frustration about having to justify his position as world number one despite believing he deserved the ranking.
Musetti advances to face Van Assche
Musetti will face Frenchman Luca Van Assche in the round of 16 after the home favourite defeated American Learner Tien in straight sets.
The Italian will be hoping to continue his impressive form in Paris after winning the Lyon title shortly before arriving at the tournament.
Match details
• Alexander Zverev: 0
• Lorenzo Musetti: 2
• Score: 6-7(5), 2-6.
• Winner: Lorenzo Musetti.
• Tournament: Rolex Paris Masters 2026.
• Round: Second round.
• Duration: 1 hour 40 minutes.
• Date: Wednesday, 4 November 2026.