The 21-year-old, nicknamed "Baby Fed" for possessing a similar playing style to Swiss great Roger Federer, was beaten 6-4 6-2 6-4 by Julien Benneteau, the number 32 seed from France.
Dimitrov, tipped to do well in Melbourne after reaching his first ATP Tour final in Brisbane a little over a week ago, produced a strangely lacklustre performance in breezy conditions and was never really in the contest.
"I definitely was not at my best, I didn't serve well, didn't move well," Dimitrov said. "It's just a match I am going to put behind me.
"Of course it's a Grand Slam event and you expect yourself to be good after having a good week and then the next thing you know, you lose in the first round in three sets."
The tennis world has been waiting for Dimitrov to make a major breakthrough since he won the junior Wimbledon title in 2008.
He ended 2012 ranked 48 and his run to the final in Brisbane lifted him a further seven places but he has yet to make it past the second round in 10 Grand Slam tournament appearances.
Dimitrov said he was still learning to get himself perfectly prepared for the bigger events.
"I probably shouldn't have played Sydney, I should have practised a bit more outdoors, because in Brisbane it was covered and didn't have so much wind," he said.
"All these small components sometimes make the difference when it comes to Grand Slams but you learn, and hopefully I will get a better first round next time."
With expectations weighing heavily on his shoulders, Dimitrov admitted it was a constant battle to remain focused on improving his game and ignoring the hype.
"Just don't fall into that trap of listening to all those things," he said.
"You'll hear it whether you like it or not but the less you try to put that pressure on you, the better it is for you.
"I am sure there's going to be a moment in your career when either you're going to say 'I've had enough' or you say, 'let's go on'.
"I'm sure eventually (the younger generation) are going to come up there with the power and strength people want to see from us," he said.
Dimitrov is also rumoured to be dating women's world number two Maria Sharapova but ducked questions on the subject and said his love life should not be discussed in public.
"I don't think (the rumours) are a distraction," he said. "I just believe I go on the court and I'm not here to speak about my private life.
"Of course, people love gossip, who doesn't? But I think it's a private invasion and I don't think that's right, not because we're different, but it's not right towards the athletes in general. I think it needs to be even forbidden to be asked."