The Brit defeated world number 16 Shapovalov, who he lost to at Wimbledon last year.
Murray will certainly relish the challenge of facing Djokovic, after the world number one beat France’s Gael Monflis in straight sets 6-3, 6-2.
The 20-time Grand Slam champion will face Murray on Thursday in the last 16 of the event, with the pair facing each other for the 37th time.
Murray had planned to skip the clay court season but reversed his decision last month after accepting a wild card into the event.
Having already beaten Dominic Thiem in the first round and now Shapovalov, Murray is looking back to his best.
Earlier, Djokovic extended his winning record over Monfils to 18 games, an ATP record for head-to-head.
The three-time Madrid champion is playing just his fourth tournament of the year after not being allowed to compete at the Australian Open and other events as he is unvaccinated against Covid-19.
There was disappointment for Britain’s Jack Draper who was knocked out by world number eight Andrey Rublev in three sets.
In the women’s event there was further British disappointment when British number one Emma Raducanu missed out on a place in the quarter-finals after suffering a 6-2,2-6,6-4 loss to Ukraine’s Anhelina Kalinina.
The 19-year-old Brit was struggling with a back issue and needed treatment at the end of the first set.
Raducanu, has had her problems with injuries already this year. She had blister problems on her racquet hand in the Australian open and also retired with a leg injury after an opening round match in Mexico in February.
The British teenagers Billie Jean King Cup debut ended in a painful fashion after being hampered by a blister on her foot.
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