The odds-on tournament favourite, who won last week's European Tour event in Germany, could only manage an average of 88.5 on home soil in Maastricht and missed 11 darts at doubles as the Irish underdog took full advantage in emphatic fashion.
"I really don't know what to say, I'm so proud of myself. I had the undo-able task and I've done it," said the world number 50 after he pinned six doubles from seven attempts to avenge his 8-2 defeat in the European Matchplay final at the start of July.
The opening two legs were shared, but O'Connor took the third and then broke throw in the fourth with a 13-darter to move 3-1 up.
He capitalised on two misses at double 16 from Van Gerwen in the fifth, and then landed back-to-back 14-darters to secure a memorable victory.
The defeat was Van Gerwen's first in the last 32 of a European Tour event since October 2015, as O'Connor set up a third round tie with Ricky Evans on Sunday afternoon.
"I'm so proud of myself," admitted O'Connor. "I had the 'undo-able' task and I've done it!
"I always feel like I can beat anybody. Michael wasn't on his game but my finishing has been absolutely unbelievable so if I can get my scoring together I'm definitely in there with a shout."
O'Connor's fellow qualifier Evans struck a magnificent 122 finish on the bullseye to defeat Steve West 6-5 as he also moved into the last 16.
Ross Smith produced a remarkable comeback from 5-1 down to claim victory over Max Hopp, taking out 160 to snatch the win in a deciding leg against the German Darts Open winner.
"I kept plugging away - I just tried to keep calm and throw like I have been doing," said Smith, who also took out a 147 finish during his fightback.
"I've been playing like that for most of the tour this year but this win means a lot to me. Max is a fantastic player and I've been in that position before of being so far in front and losing."
Smith now takes on Ritchie Edhouse for a place in the quarter-finals, after the qualifier knocked out number five seed James Wade 6-4.
Typically clinical finishing helped Wade hold an early advantage, but missed chances to break throw in legs six and eight were punished when Edhouse finished 121 to move 5-4 up before sealing the win.
"On stage it's the biggest game I've won in my career and I'm so happy," said Edhouse. "I had a bit of fortune, but I'll take it. I like Ross and it will be a very good game."
Defeat for Austrian Darts Open winner Jonny Clayton - who lost out 6-3 to Kyle Anderson - means that there will be a new 2018 champion on the European Tour from Sunday's final stages.
Australian ace Anderson pulled clear from three-all to book his third round spot against Jeffrey de Graaf, who is the last remaining Dutchman going into day three.
Host Nation Qualifier De Graaf delighted the Maastricht crowd with a 6-3 success over Stephen Bunting, sealing the win with a 108 checkout.
World number two Peter Wright was a 6-2 winner over Kevin Painter, hitting six doubles from 11 attempts as he moves through to take on Dave Chisnall in round three.
Last weekend's European Tour average record-breaker Chisnall continued his unbeaten run on the big stage against Rowby-John Rodriguez with a 6-3 triumph over Friday's top performer.
Daryl Gurney survived two missed match darts from Ryan Searle before he finally claimed victory from their tie in a dramatic deciding leg to set up a tasty tie with Joe Cullen.
Cullen continued his consistent form on the continent, making it through to the final day of European Tour for the tenth time this year with a 6-4 victory over Welsh veteran Barrie Bates.
Ian White impressed with a 102 average as he saw off former World Youth Champion Arron Monk 6-4, coming from 4-2 down to sweep to victory.
Mervyn King secured a dominant 6-2 win over Lithuania's Darius Labanauskas, with the former European Tour event winner now set to take on White.
Josh Payne knocked out 11th seed Darren Webster, taking out finishes of 126 and 106 as he moved through to the final day in Maastricht.
Two-time World Champion Adrian Lewis produced a high-quality performance to defeat Wayne Jones 6-1 and breeze through to Sunday afternoon’s last 16.
Lewis averaged almost 98 and proved too strong for Jones, despite a 164 finish in the opener gaining the Wolverhampton ace his only leg of the contest.
"I love playing in the Netherlands, the crowd are fantastic and it brought back many memories of when I first played here," said Lewis.
"My main aim is to push up as far as I can go and keep concentrating, making sure I build on that as we approach the back end of the year."
Lewis now meets Payne in the third round, and added: "Josh did really well against Darren. He dug in deep so I need to make sure I do my job tomorrow and keep on top of him."
Simon Whitlock began his challenge to claim a second European Tour success in the Netherlands - following his 2012 Dutch Darts Masters win - as he swept past Spain's Cristo Reyes 6-1.
Whitlock now plays Darren Johnson, who was another 11-leg winner as he progressed against Welsh ace Gerwyn Price.
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Saturday results & Sunday schedule
Saturday September 8
Second Round (Best of 11 legs)
Afternoon Session (12pm BST)
- Steve West 5-6 Ricky Evans
- Mervyn King 6-2 Darius Labanauskas
- Dave Chisnall 6-3 Rowby-John Rodriguez
- Joe Cullen 6-4 Barrie Bates
- Darren Webster 3-6 Josh Payne
- Gerwyn Price 5-6 Darren Johnson
- Stephen Bunting 3-6 Jeffrey de Graaf
- Adrian Lewis 6-1 Wayne Jones
Evening Session (6.15pm BST)
- Ross Smith 6-5 Max Hopp
- Ian White 6-4 Arron Monk
- Ritchie Edhouse 6-4 James Wade
- Daryl Gurney 6-5 Ryan Searle
- Peter Wright 6-2 Kevin Painter
- William O'Connor 6-1 Michael van Gerwen
- Jonny Clayton 3-6 Kyle Anderson
- Simon Whitlock v Cristo Reyes
Sunday September 9
Afternoon Session (12pm BST)
Third Round (Best of 11 legs)
- William O'Connor v Ricky Evans
- Joe Cullen (8) v Daryl Gurney (9)
- Ritchie Edhouse v Ross Smith
- Kyle Anderson v Jeffrey de Graaf
- Peter Wright (2) v Dave Chisnall (15)
- Simon Whitlock (7) v Darren Johnson
- Adrian Lewis (6) v Josh Payne
- Ian White (3) v Mervyn King (14)
Evening Session (6.15pm BST)
Quarter-Finals (Best of 11 legs)
- O'Connor/Evans v Cullen/Gurney
- Edhouse/Smith v Anderson/De Graaf
- Wright/Chisnall v Whitlock/Johnson
- Lewis/Payne v White/King
Semi-Finals (Best of 13 legs)
Final (Best of 15 legs)
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