Gauff hit a whopping 54 unforced errors and served 14 double faults on the way to a 6-1 6-7 (3-7) 6-0 loss to Spain's Jessica Bouzas Maneiro at Perth's RAC Arena on Monday.
Taylor Fritz came to the rescue for the US in the men's singles rubber, producing an epic 7-6 (7-4) 3-6 7-6 (8-6) triumph over world No.38 Jaume Munar in a match that lasted three hours and 13 minutes.
In a titanic battle, Fritz blew two match points on Munar's serve while leading 6-5 in the third set.
Munar had a match point in the tiebreak, but Fritz pulled out a huge serve to save himself, before holding his nerve down the stretch to seal the win.
It meant the tie would come down to the mixed doubles, and Gauff teamed up with Christian Harrison to produce a 7-6 (7-5) 6-0 win over Yvonne Cavalle Reimers and Inigo Cervantes.
"I was happy to get back out there on court and get a point for my team today," Gauff said.
Fritz has been battling knee tendinitis since last year, and has already conceded it will be an injury he'll have to manage at the Australian Open.
"It was a crazy match. It was really tough, really physical. Once I cool down, I'm going to feel awful," Fritz said after his singles win.
"My knee is something I'm going to be dealing with for a while. I started feeling it towards the end of the first set, but it didn't get any worse."
On Saturday, Gauff swept to a 6-1 6-1 win over Solana Sierra to help propel the defending champion US to victory in their tie against Argentina.
But in 30-degree heat in Perth on Monday, Gauff looked a shadow of herself during the first and third sets.
World No.42 Bouzas Maneiro won the first five games of the match, with Gauff committing 18 unforced errors in a first set lasting just 33 minutes.
Major alarm bells were ringing as Gauff went down 1-4 in the second set.
By that stage she had hit just four winners, but she launched a huge fightback to take the second set in a tiebreak.
With her tail up, Gauff was expected to go on with the job in the third set.
But Bouzas Maneiro had other ideas, using a bathroom stop to regain composure before breaking Gauff three times to wrap up the third set in 38 minutes.
"You see she won the second set, and I went to the bathroom and I was trying to focus, just stay point by point. That was my mentality in the third set," Bouzas Meneiro said.
Switzerland became the first team to secure their spot in the quarter-finals after posting a 2-1 win over Italy in Sydney on Sunday night.
On Monday in Sydney, Czechia secured a 3-0 tie win over Norway after Jakub Mensik downed fellow top 20 star Casper Ruud 7-5 7-6 (8-6) following on from dual grand slam winner Barbora Krejcikova's 6-4 6-3 victory against Malene Helgo.
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