The 21-year-old beat the battle-weary Serb, who was clearly in pain as he stretched for balls, 7-6 (7-4), 7-5, 7-6 (7-3) in 3hr 21 min in a night match on Rod Laver Arena.
Chung, the first South Korean - male or female - to reach the round of 16 at any Grand Slam, will face unseeded American Tennys Sandgren, ranked No. 97, in the quarter-finals on Wednesday.
Two years ago, Djokovic outclassed Chung in straight sets in the opening round of the Australian Open, but this time, he spectacularly reversed the result with three hard-fought sets against the wounded Serb in the fourth round.
Djokovic, who sought treatment for his troublesome right elbow and suffered an apparent hip injury when stretching for a ball, battled through in great discomfort as
Chung stayed composed and mentally tough to claim his biggest win.
“I didn’t know if I was going to win this match tonight, but I was just honoured to play with Novak again,” said Chung.
“When I was young, I was trying to copy Novak because he’s my idol. I can’t believe this, dream’s come true tonight.”
Djokovic showed the effects of playing four rounds in his first tournament back after six months out since Wimbledon with elbow trouble.
He made a horror start to the match with two double faults in each of his two opening service games for a double break.
The former world No. 1 clawed back to 5-5, but he called for the trainer to treat his right elbow early in the second set.
It got worse for Djokovic as he screamed in agony stretching for a point, but he gingerly carried on with the signs of wear and tear plainly visible.
Djokovic attempted to shorten the points and avoid long tiring rallies as Chung continued to pull ahead.
Fast-improving Chung won the Next Gen ATP Finals last November which featured fellow young guns Andrey Rublev, Karen Khachanov and Denis Shapovalov.
He dropped serve to start the third set but Djokovic gave the serve straight back and Chung got another break to go ahead 3-1.
But Djokovic bravely dug in and again broke back and took the set to a tiebreaker where Chung won some outstanding points to hold three match points.
Djokovic’s resistance was finally over when he sent a backhand wide.