The Uzbekistan-born 25-year-old broke the sluggish Spaniard in the opening game, before holding on to his serve without pressure to claim the first set 6-4.
Ferrer looked invigorated at the start of the second set. A flurry of superb groundstrokes bamboozled his opponent, as he claimed the opening three games in double-quick time.
Istomin, who had never beaten at top-10 player, responded brilliantly and, after breaking back to 2-3, roared in delight.
Ferrer looked unsettled, donating a host of unforced errors and allowing Istomin to win the next four games and the match.