Growth was expected to decline after it fell a revised 0.7% in the second quarter on weak domestic demand.
Japan has been in recession four times since the global financial crisis.
On a quarterly basis, growth fell 0.2% in the third quarter from the previous one, weaker than forecasts of a 0.1% decline.
The seasonally adjusted figure was also much lower than expectations of a 0.2% drop.
Economists said the weak data will put more pressure on the government and central bank to continue to stimulate the economy.
However, Marcel Thieliant, economist at research firm Capital Economics, said policymakers have showed "considerable reluctance" to respond to weaker growth with more stimulus as inflation accelerates, and he does not expect more easing at the central`s meeting this week.
"The upshot is that the Bank`s preferred inflation measure, which excludes prices of fresh food and energy, should start to moderate soon," he said in a note.
"We therefore remain convinced that more stimulus will eventually be needed, and now believe that the January meeting is the most likely venue for its announcement."
Business spending falls
Japanese companies continue to be wary of using their record profits to raise wages and invest in the economy - a major challenge for Prime Minister`s Shinzo Abe`s "Abenomics" policies.
Business spending fell 1.3%, against forecasts of a 0.4% decrease. It also marked the second quarter in a row of declines.
But, private consumption, which accounts for 60% of the economy rose 0.5% from the previous quarter.
Consumer spending has picked up from the hit it took last year from an increase in sales tax in April, which contributed to the recession in 2014.
Despite the declining growth, the government is positive that a recovery is underway.
"While there are risks such as overseas developments, we expect the economy to head toward a moderate recovery thanks to the effect of various (stimulus) steps taken so far," economics minister Akira Amari said in a statement.
But in reaction to the growth figures, the benchmark Nikkei 225 index was down 1.1% to 19,372.98 points in early trade in Tokyo.
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