Highly rated Australian teenager Kyrgios was unable to assert himself on proceedings and was beaten 7-6 (7-4) 7-6 (7-3) by his more experienced compatriot Matosevic.
Matosevic did not face a single break point throughout the match at the ATP 250 hard-court event in Kuala Lumpur, while Kyrgios saved five.
The 29-year-old required two tie-breaks to overcome Kyrgios, and will now face Go Soeda - who defeated fellow Japanese Kento Takeuchi - in round two.
The only other seed in action on Tuesday was Pablo Andujar, and the seventh-seeded Spaniard cruised through against Gregoire Burquier 6-2 6-4.
Bernard Tomic's disappointing run continued as he fell at the first round for the third time in the hard-court season.
Having exited the Cincinnati Open and Toronto Masters at the first hurdle, he again tasted defeat as Pierre-Hugues Herbert prevailed in a deciding set tie break, the Frenchman winning 6-4 3-6 7-6 (9-7).
Jarkko Nieminen was not troubled, though, as he came through in straight sets against Philipp Oswald.
Tuesday also saw a 6-4 3-6 7-6 (7-5) win for Philipp Petzschner over James Ward to set up a match with second seed Ernests Gulbis, and Rajeev Ram will face top seed Kei Nishikori after coming from a set down to beat Omar Jasika 4-6 7-5 6-3.