Local hope De Minaur, who beat world No. 7 Matteo Berrettini this month at the ATP Cup in Sydney, dropped just one set at Melbourne Park en route to the fourth round and again threatened to go deep into his home slam.
But the 7-6(3), 6-3, 6-4 defeat to Sinner on Monday night marked the sixth time de Minaur has exited a major tournament in the third or fourth round, including his last three appearances at Melbourne Park.
The 22-year-old's sole Grand Slam quarterfinal appearance to date came at the 2020 US Open.
"I had some good results and it was a little bit of a bittersweet ending," De Minaur said.
"I didn't want my Australian Open campaign to be done tonight, but it's just how it went.
"I had my chances and didn't take my opportunities, those break points early and I came up against an opponent that played very well.
"He played some very good tennis in the important moments."
Australian No. 1 De Minaur prepared for "immense firewpower" from Sinner and copped plenty of it.
The rising world No. 10 -- still just 20 years of age -- got through a first-set tiebreaker and blasted 35 winners to reach his second grand slam quarter-final.
De Minaur tried to mount a late challenge, breaking back to trail 3-4 in the third set but the damage had been done.
The Sydneysider made 37 unforced errors to the Italian's 30, and created eight break points but was only able to capitalise on one.
"I had break points in the first game of the second set and I didn't convert again," De Minaur said.
"Up to that point I was 0-6 on break points and he started to lift his level as the court got shade.
"There was no more sun so he was really able to hit the ball through the court a lot more and we all know the amazing firepower that he has."
De Minaur will head to Europe for next month's Rotterdam Open before a possible return to Australia in March for the Davis Cup qualifying round against Hungary.
"It's been a good start to the season bringing in some good momentum and I came up short today but I'm happy with where my level is going," De Minaur said.
"It's definitely a big improvement from last year and I'm excited for what's to come."
The ruthless Sinner is unbeaten for the year, having won all his matches at the ATP Cup and racing through to the Open quarter-finals for the loss of just one set.