The Sydney wildcard's impressive run was stopped at Memorial Drive by American third seed Sebastian Korda 6-4 6-4 in their Thursday clash.
O'Connell will at least arrive at next week's Australian Open with a boost of confidence after taking it to the world No.29, who reached the last eight at Melbourne Park in 2023.
Korda made last year's final in Adelaide, where he lost to top seed Novak Djokovic in three sets after blowing a championship point.
O'Connell temporarily retired from the sport to clean boats in 2018 following a spate of injuries, but found career-best form last year, with his ranking reaching No.53.
"I played good tennis last week against (Alexei) Popyrin (in Brisbane) and got through a couple of matches here," O'Connell said.
"It was a pretty high-quality match today but Sebastian was playing unbelievable."
Korda will face Jiri Lehecka in the first semi-final on Saturday after the seventh-seeded Czech beat big Chilean Nicolas Jarry 6-4 7-5.
Lehecka's sustained discipline and pressure from the baseline proved too much for second seed Jarry, whose errors mounted and ultimately cost him.
Alexander Bublik has been winning fans, as well as his quarter-final, at the Adelaide International. (Matt Turner/AAP PHOTOS)
Kazakh showman Alexander Bublik pulled out his full bag of party tricks en route to a hard-earned 6-3 6-7 (4-7) 7-5 win over fourth-seeded Italian Lorenzo Musetti.
In the second set, eighth seed Bublik followed an underarm serve with an audacious between-the-legs winner, before bowing to the crowd.
Bublik had the audience in stitches again in the third set when he leapt over the advertising hoarding while chasing a wide ball, pulled up just in front of some front-row fans and pinched one of their chips.
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