There was also a strong win for Alexei Popyrin as the players fine-tune their game before this month's US Open.
Walton defied his world ranking of No.85 to beat Russian 12th seed Daniil Medvedev in three sets in the first meeting between the pair.
Former world No.1 and 2021 US Open champion Medvedev appeared to be cruising to victory after taking the first set with a dominant performance in the tiebreak.
However, Walton turned the match on its head to win 6-7 (0-7) 6-4 6-1 and set up a third-round encounter with Czech Jiri Lehecka, the 22nd seed.
De Minaur's encouraging hard-court match towards the US Open ran into a surprise giant roadblock in Cincinnati at the hands of towering American Reilly Opelka.
The Australian No.1, who has already won a title in Washington during the North American swing, had been hoping for another deep run at the Masters 1000 event in Ohio before the final grand slam of the year in New York.
But despite having never lost previously to the 211cm Opelka, the tallest man on the ATP tour, "Demon'' found the giant too hot to handle on a sizzling Sunday as the world No.73 prevailed 7-6 (8-6) 6-4 in their second-round clash.
In better news for Australia, Popyrin, celebrating his first tournament as a top-20 player, defeated rising Spanish teenager Martin Landaluce 7-6 (7-3) 6-3 to book a challenging third-round date with Russian Andrey Rublev, the No.9 seed.
But de Minaur's defeat against a player he had defeated in their five previous meetings was the biggest disappointment with Flushing Meadows just around the corner.
Opelka, always a dangerous customer with his big game, proved in scintillating form, determined to avoid the ignominy of losing all six matches to the same opponent for the first time in his career.
Going for broke on de Minaur's serve, Opelka not only saved all seven break points he faced in the one-hour 41-minute contest but also blasted down 14 aces among his 38 winners, with the high bounce generated from his booming delivery often forcing the Australian to take the return above shoulder height.
It was a rude shock for world No.8 de Minaur, who's had a Tour-leading 24 hard-court victories this season and who is hoping for the protection of a top-eight seeding in New York. He now has to hope that his nearest pursuers in the rankings don't have a big week in Cincinnati that could scupper that.
"I didn't serve as well as I'd have liked to, but everything else was working," enthused Opelka, whose monster forehand proved a blistering weapon in the first-set tiebreak.
"I was pretty consistent from the baseline the whole match. My serve fluctuated and it was a bit of a surprise that the other things came through well for me today. I think I returned really well too."
In other second-round action, world No.2 and second seed Carlos Alcaraz was pushed to the limit before beating Bosnia's Damir Dzumhur 6-1 2-6 6-3.
German third seed Alexander Zverev thrashed home hope Nishesh Basavareddy 6-3 6-3, and Canadian Open winner Ben Shelton advanced when Argentina's Camilo Ugo Carabelli retired injured.
Shelton next faces Spaniard Roberto Bautista Agut, who beat 32nd seed Cam Norrie, of Britain, 6-4 6-3 earlier in the day.
- with Agencies
