Stephens, the world number 40, got the better of the 15th seed who made her debut in Paris back in 1997.
At 34, and the oldest woman in the draw, the defeat is certain to place a question mark over the future of Williams who was runner-up to sister Serena at the French Open in 2002 but has not gone beyond the fourth round since 2006.
Stephens has made the fourth round in each of the last three years and could face Serena, with whom she has enjoyed a rollercoaster relationship, in the last 16 this time around.