MONACO -- After battling past Gilles Simon in the second round, 2013 and 2015 champion fought past Carreno Busta 6-2, 4-6, 6-4 in a nail-biting third round match.
Djokovic dropped five straight games from 2-0 up in the second set and had to dig deep against the gritty Spaniard, whose speed across the court saw him retrieve countless shots.
Djokovic trailed 15-40 serving in the ninth game of the decider but held his nerve. The Serb sealed victory with a cross-court volley at the net.
"I could have easily lost this match. I cannot allow myself many more (matches like this) if I want to go far in this tournament," Djokovic said.
Meanwhile, 2014 champion Stan Wawrinka was also eliminated on Wednesday as he lost to Pablo Cuevas of Uruguay 6-4, 6-4 in the third round.
Three-time Grand Slam winner Wawrinka never found his touch or range and conceded match point when his backhand pass - normally one of the best shots in men's tennis - clipped the net and went out. Cuevas hit a sweet forehand winner down the line on the next point and raised his arms after beating Wawrinka in their first-ever meeting.
"If you hesitate a little, he will get you," Wawrinka said. "When you're not at your top level, he knows what to do."