By winning his opening round-robin match of this elite year-end event, Ferrer registered his first-ever win over the Scotsman on hard courts and his first victory this year over the world No. 3 in four tries.
Murray normally relies on consistency and defense but in this match the Scotsman, who was struggling with a nagging groin injury, alternated brilliant winners with an even higher number of mistakes and the steady, speedy Spaniard took advantage.
The world No. 3 was the heavy favorite in the match, played before a packed crowd at London's O2 Arena, and he quickly jumped ahead by breaking Ferrer's serve in the third game thanks to effective use of the drop shot and an error by the Spaniard on break point.
But the erratic play that would plague Murray reared its ugly head in the very next game as he donated three points with forehand errors to give the break right back.
The match then settled down with five straight service holds, although Murray continued to raise eyebrows with his hit-or-miss tactics.
In the 10th game, Murray once again found himself in trouble on serve and also showed further signs of physical problems, even walking over to the umpire mid-game to ask for a visit from the trainer.
The Scotsman nearly sealed the game with a drop shot, but Ferrer scurried up to it to put the ball away; then he wrapped up the first set a few points later when Murray hit a forehand well long and wide.
Just as in the first set, Murray began the second with an early service break before Ferrer responded with precise baseline play to put his opponent under pressure and then evened the match at 2-2 when a Murray backhand sailed long.
The set then stayed on serve for a few games and it seemed like it might be decided in a tiebreaker, but two unforced errors by Murray and a forehand volley winner by Ferrer gave the Spaniard match point, which he won with a crosscourt backhand winner.
"I'm very happy," Ferrer said in the post-match press conference. "I beat Andy, in London, in his home. It is not easy. I played very consistent all the match. Maybe the first set I played better than the second, (because) in the second (set), sometimes I was a little bit nervous.
Murray, who told reporters he had not been able to train adequately in recent days due to the problem with his groin, said he "didn't feel great."
"I still had a few chances, especially in the second set. I think I was a break up in both sets, so (it's) disappointing," Murray added.
Ferrer, who is making his third appearance at this year-end event, reached the final in 2007 when the tournament was played in Shanghai but lost that match in straight sets to Swiss great Roger Federer.
The tournament got underway on Sunday with two Group B matches won by world No. 2 Rafael Nadal of Spain and Federer.
The Barclays ATP World Tour Finals is regarded as the fifth-most prestigious tournament on the men's tennis calendar after the four Grand Slams.