The six-time finalist lost the last three frames against Northern Ireland's Gerard Greene in a 10-9 defeat.
However, 2006 champion Graeme Dott and two-time runner-up Matthew Stevens advanced.
Ng On Yee, aiming to become the first female player to qualify for the Crucible, lost 10-1 to Peter Lines.
Dott beat Brandon Sergeant 10-8, while Stevens overcame Josh Boileau 10-2.
Three-time quarter-finalist Ryan Day beat fellow Welshman Daniel Wells by the same score.
There are three rounds of qualifying, with the successful players advancing to the main tournament, which begins on 16 April.
Jimmy White missed out on a first World Championship appearance since 2006 after losing in the first round of qualifying.