The Romanian, ranked number 92 in the world, 51 places behind the Russian, won 4-6, 6-4, 6-3.
In a match lasting more than two and a half hours, Sharapova hit 52 unforced errors as opposed to just 17 from Niculescu.
In blustery conditions, Sharapova also struggled to get to grips with the 30-year-old Niculescu's distinctive style, which relies heavily on a sliced forehand.
The former world number one, twice a winner in Doha, had been given a wildcard into the draw and was one the tournament's major attractions.
"So, physically I felt good. I just got pretty passive in the end and starting making too many errors."
It was the 30-year-old's first appearance in Doha since 2013 and her first match since losing to Angelique Kerber in the third round of the Australian Open last month.
Sharapova returned to tennis last April after completing a 15-month ban for failing a drug test.
A jubilant Niculescu described it afterwards as "a very good win" as well as "a tough match".
"And when I feel good on the court then I play relaxed, I can be good and can be dangerous."
Niculescu's reward is to play either Magdalena Rybarikova or wildcard Fatma Al-Nabhani in the next round.
Nine of the top ten women's players are competing in Doha this week, but arguably Sharapova was the biggest attraction.
Her defeat is unlikely to please organisers after the men's tournament in Qatar last month was decimated of big name stars through injury.
In another Romanian versus Russian clash, Halep will start her tournament on Tuesday, playing against Muscovite, Ekaterina Makarova, a former world number eight.
Also through on Monday was world number 30 Dominika Cibulkova, who beat Russia's Anastasia Pavlyuchenkova, the world number 22, 7-6 (10/8), 6-4.
Disclaimer: No Business Standard Journalist was involved in creation of this content
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