Kohlschreiber emerged with a 6-7 (5/7), 7-5, 6-1 victory over the 11th-seeded Roddick, who came into the tournament with a number 15 world ranking that could use a boost in time for the seedings for the US Open.
Instead, Roddick never really recovered after he was docked a point that cost him a break of serve that gave Germany's Kohlschreiber a 2-0 lead in the third set.
Roddick had already been warned by the chair umpire for slamming his racquet to the court after dropping the second set.
He double-faulted in the second game of the third to give Kohlschreiber a break point and smacked a ball into the stands in frustration.
That infraction cost him the point and the game, and after arguing with the umpire he promptly dropped three more games before holding for 5-1.
Kohlschreiber, who said he just tried to stay calm as Roddick continued to complain to the chair umpire at every changeover, served out the match, finishing it off with a service winner and shaking hands with Roddick.
"I think he did the right thing, but it's tough to call," Kohlschreiber said of the umpire's decision to dock Roddick a point.
"I tried to stay calm. I thought, hopefully he's not playing his best tennis now because he's so pumped."
Kohlschreiber had done well to rally, and said getting a bead on Roddick's powerful serve made the difference.
"I had no chance in the first set. Finally I started to read his serve. I think that was the whole key for the match," Kohlschreiber said. "I just tried to hang in. I was in the right spots and I started to return his serve well."
"For two sets tonight I actually hit the ball well considering," said Roddick, who suffered an abdominal injury in July and had not played since Wimbledon.
"I probably will wake up tomorrow morning feeling a little bit better about where I'm at than I did when I woke up this morning. I'm not that concerned about New York right now."
The joint men's and women's event -- one of the ATP's elite Masters tournaments for the men -- is a tuneup for the US Open, the final Grand Slam of the season that starts in New York on August 29.
With the top eight seeds enjoying first-round byes, Monday saw players jockeying for position in the second round.
Rising US talent Ryan Harrison defeated Argentina's Juan Ignacio Chela 6-3, 6-3 to book a second-round match against world number one and top seed Novak Djokovic.
Serbia's Djokovic extended his lead atop the rankings released on Monday after his victory in the Montreal Masters on Sunday -- a victory that gave him his ninth title of 2011 and made him the first man to win five elite Masters titles in the same season.
Argentinian veteran David Nalbandian defeated Japan's Kei Nishikori 6-4, 6-4 to book a second-round clash with world No. 4 Andy Murray.
US wild card Christina McHale defeated Bulgarian Tsvetana Pironkova 7-5, 4-6, 6-1 to earn a shot at women's top seed Caroline Wozniacki of Denmark.
Russian Ekaterina Makarova set up a second-round meeting with second-seeded compatriot Vera Zvonareva with a 7-5, 6-3 victory over Spain's Maria Jose Martinez Sanchez.
Israel's Shahar Peer defeated Wimbledon semi-finalist Sabine Lisicki of Germany 6-4, 7-6 (7/4) to set up a second-round clash with third-seeded Victoria Azarenka of Belarus.
Australian qualifier Anastasia Rodionova, ranked 139th in the world, crushed 42nd-ranked Polona Hercog 6-0, 6-0 to set up a meeting with fourth-seeded Maria Sharapova.
Russian Svetlana Kuznetsova, seeded 14th and trying to bounce back after a first round exit in Toronto last week, defeated US qualifier Jill Craybas 6-3, 6-4.
Serbia's Ana Ivanovic, a former French Open champion who is seeded 15th, advanced with ease, defeating American Alexa Glatch 6-0, 6-2.
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