Sharapova, who has yet to drop a set after routing Alison Riske 6-3, 6-0 in the third round, heads into the second week as the newly-installed favourite following Alize Cornet's shock 1-6, 6-3, 6-4 victory over world number one Williams on Saturday.
Serena's defeat is a huge boost for French Open champion Sharapova, who had been scheduled to meet the American top seed in the quarter-finals.
That would have been a major obstacle to Sharapova's hopes of winning Wimbledon for the second time as she had lost her previous 15 meetings with Serena.
But with Williams vanquished by Cornet's brilliant display on Court One, fifth seed Sharapova now has a golden opportunity to lift the Venus Rosewater dish for the first time since 2004, when she famously shocked Serena in the final as a 17-year-old.
The Russian will face German ninth seed Angelique Kerber on Monday for a place in the quarter-finals and she struck an ominous note for her rivals by admitting she is hitting top form at just the right moment.
"I'm pleased that I've gone three good matches in. I feel like I improved with every match," Sharapova said.
"I started the first match a little nervous, which was expected. Once I got through that, I feel like I've elevated my game.
"I feel like I'm serving better. I didn't face a break point after the first game. Like I said, it's really the footwork, little things, imposing yourself out there."
It is the first time since 2006 that neither Serena nor sister Venus, beaten by Petra Kvitova on Friday, will be in the Wimbledon fourth round and with the draw also blown wide open with second seed Li Na's defeat on Friday, Sharapova could be forgiven for feeling a sense of deja vu.
Just last month, Williams slumped to a surprise second round defeat at the French Open and Sharapova took advantage to win the title in Paris for the second time.
Following victory in Roland Garros with more glory at Wimbledon has traditionally been tough to achieve, but Sharapova gave an upbeat reply when asked if she can become the first woman to do exactly that since Serena in 2002.
"This is only my second time trying to do that. Of course, the transition, it's no secret, it's very difficult. But I'm quite happy with the way I've gone about things so far," said Sharapova, who was beaten in the Wimbledon second round by Michelle Larcher de Brito last year.
"That transition has always been quite tough for me. Every year I try to maybe find a better formula towards my body and what will get me enough rest and enough practice and matches and all that.
"You never know what to expect. Each match poses its different challenges.
"But I'm happy I've gone further than last year, erasing those memories and trying to form new ones."
French 25th seed Cornet's reward for the best win of her career is a first Wimbledon last 16 appearance against rising Canadian star Eugenie Bouchard, with a quarter-final clash with Sharapova on the cards if she can beat the 13th seed.
Of the other title contenders, 2012 Wimbledon runner-up Agnieszka Radwanska faces Russian 22nd seed Ekaterina Makarova.
Third seed Simona Halep of Romania, beaten by Sharapova in the recent French Open final, reached the last 16 for the first time with a 6-4, 6-1 win over Swiss teenager Belinda Bencic and faces Kazakh world number 72 Zarina Diyas.
Kvitova, the 2011 Wimbledon champion, takes on China's Peng Shuai, while former world number one Caroline Wozniacki meets Barbora Zahlavova Strycova, the Czech world number 43 who shocked Chinese second seed Li Na in the third round.