With the presence of the victor of the 2016 tournament, Britain's Andy Murray in the stands, Isner won the first set, which sent Novak Djokovic directly to the semifinals.
Djokovic will now play Zverev on Wednesday afternoon with the victor likely to top their group, named after Brazilian clay court ace Guga Kuerten.
The ATP's competition, to be staged in Australia before the year's first Grand Slam tournament, will feature 24 teams, offer $15 million in prize money and ranking points.
The scrap is now on for second place with Zverev targeting a win over Isner on Friday to reach the semi-finals for the first time after falling in the group phase past year. I think tennis is in good hands. "I guess that's the advantage of having a guy like Novak in your group", said Isner. Now into his fourth ATP Finals, he had managed just one round-robin win, 1-9, and although had the initial lead against Zverev on Monday, he was edged out of both sets in a tie-breaker.
The American posted an emotional tribute to Kyle Morgan, who passed away aged 35 after being reported missing two days ago.
A semi-final match against Roger Federer on Saturday is on the cards, although Kevin Anderson, Kei Nishikori and Dominic Thiem all could, in theory, meet the Serb in the next round.
In that match in Shanghai, Djokovic needed just one hour to break Zverev's serve four times without facing a break point himself, 6-2.
There was not so much as a break point in the first eight games, but then Djokovic looked as though the long exchanges were taking their toll on the Serb, and he sucked in air as he faced two break points.
Speaking about the court conditions, he said: "It takes a little bit of time really to get yourself adjusted to the surface.it takes a lot of rotation, takes a lot of spins".
He double-faulted to concede the set and despite hanging on to level at 1-1 in the second, his resistance crumbled quickly as Djokovic reeled off the last five games. I played very solidly'.
Djokovic also said fans should be patient with the likes of Zverev and fellow youngsters like Croatia's Borna Coric and Greece's Stefanos Tsitsipas as they seek to make their breakthroughs in the sport's biggest events.