The 19-year-old Pavic saved all four break points he faced and converted four out of the six he earned.
"My coach told me to play my game and not pay attention to the fact that is a former No. 1," Pavic said. "This win means so much."
Ferrero won at Umag in 2010, defeating Potito Starace of Italy in the final for one of his 16 career singles titles. Earlier Tuesday, Starace beat Slovak qualifier Ivo Klec 6-3, 7-6 (6) to advance to the second round.