Back on court for the first time since his epic loss to Rafael Nadal in the Wimbledon final, Federer was beaten 2-6 7-5 6-4 and his ranking is now under serious threat from Nadal who beat American qualifier Jesse Levine 6-4 6-2.

Federer had looked ready to take out his Wimbledon disappointment on Simon when he won the first four games on the way to the opening set.

But Simon, riding the momentum from his championship win in Indianapolis on Sunday, refused to buckle, battling back to beat the 12-times grand slam winner and reach the third round.

It was the first time Federer had lost his opening match in a tournament since falling to Briton Andy Murray in Dubai in March.

"The hard court season just started so it is not the end of the world but I wish I could have started better," Federer told reporters. "I like this surface, I like this tournament, I have done well in the past here so it definitely hurts.

"I have to regroup and look forward. The bigger picture is the Olympic Games and the US Open and those are the places I really want to win so I have to make sure I am ready for that."

TRICKY OPPONENT

The 22nd-ranked Simon represented a tricky opponent for the rusty Federer, who had only resumed practice four days before arriving in Toronto and received a first-round bye.

Simon, meanwhile, was well into his hardcourt campaign after claiming his fourth career win and second title of the season in Indianapolis with a straight-sets victory over Russian Dmitry Tursunov.

"I was playing like I was in a dream," Simon said. "I just saw the ball and hit it as hard as possible.

"I don't know it is really unbelievable to beat Roger like this. I'm so confident actually because I won the tournament last week.

"For sure this is my best victory. I don't think that you win so many times against the number one."

Nadal, also back in action for the first time since Wimbledon, struggled to find his rhythm and fell 4-1 behind in the opening set against Levine.

But once the Spaniard found his range his opponent had few answers, Nadal tearing through the next five games to take the first set and cruising to an easy victory which stretched his unbeaten run to 25 matches.