The Serb will next face Cypriot Marcos Baghdatis, who beat Michael Berrer of Germany 7-6 6-1.
Ljubicic saw off fifth seed Jo-Wilfried Tsonga in straight sets in the previous round while defending champion Djokovic needed three sets to overhaul Viktor Troicki.
It was 30-year-old Ljubicic who dominated the opening exchanges. The world number 26 reached a career high ranking of three in 2006 after reaching the French Open semi-final and showed that form as Djokovic struggled to control his groundstrokes.
After racing to a 30-0 advantage, two unforced errors from Djokovic handed Ljubicic the break he deserved in the fifth game.
Ljubicic held to cement his advantage before sealing a double break and serving out to take the first set.
Ljubicic’s serve proved crucial in his demolition of Tsonga and Djokovic let out a cry out frustration early in the second set after seeing another ace whistle past him.
And while Djokovic began to find his edge, Ljubicic simply did not give the 2008 Australian Open champion a chance to make an impact with a flawless display of serving.
Djokovic also gave away little on his serve until the seventh game when the Beijing Olympic bronze medallist lacked allowed Ljubicic to fight back from a 40-15 deficit.
But Ljubicic’s ruthless streak deserted him and he failed to convert two break points as Djokovic held his nerve to stay on level terms.
Ljubicic was left to rue that missed opportunity when Djokovic broke three games later to seal the set.
All the momentum was with Djokovic as he began to rattle through the gears to punish Ljubicic with some booming ground strokes.
There was no way back from there for Ljubicic as Djokovic showed his class to seal the final set in quickfire fashion to register a hard-fought victory.
Mikhail Youzhny remains the only other seed in the tournament after Marin Cilic’s straight-sets defeat to Jurgen Melzer, leaving Djokovic, as overwhelming favourite to capture the $383,000 (£252,000) prize.