In another major upset, Denmark's Camilla Martin bowed out of the women's tournament in her last Olympics, beaten 11-2, 5-11, 13-10 in a second round clash with unseeded Briton Tracey Hallam.
Lin, known as "Super Dan", had been heavily fancied to underline Chinese dominance in the sport.
But on the night, Indonesian-born Susilo, 25, who had stretched the Chinese in the semi-finals of the All England championships in March, proved the stronger.
Golden girl Martin, a silver medallist in Sydney, is in her farewell year on the circuit at the age of 30 and had been hoping to sign off in style.
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"I said that I wanted to enjoy today's match and I did," said Hallam, 29.
"I tried to keep control over her. Although I felt tired during the match yesterday, my body got used to it and today I felt better."
Dejected Martin, seeded seven, said: "This is my last Olympics and I was hoping for much better than bowing out in the second round."
Hallam may have been inspired by meeting British Prime Minister Tony Blair 24 hours earlier when she won her first round match.
Blair turned up with his wife Cherie to watch British players in action and later congratulated Hallam.
