Serb Djokovic was taken to five sets by Seppi at the French Open earlier this year, and was given a stern test by the Italian in the opening set.
But with Seppi's head-to-head record against the Serb standing at eight defeats in eight matches coming into the contest, the gulf in class eventually told.
Djokovic was not at his best, spurning six break points in the first set, before winning on a tie-break.
Having finally got the best of his opponent's serve in the second set, however, there was no way back for Seppi.
"I wasn't satisfied with my performance, I will have to play much better than this in order to go far," said the 25-year-old Djokovic.
"There were a lot of unforced errors from both of us. It wasn't a really pretty match."
The world number two now faces Nikolay Davydenko, who enjoyed a trouble-free passage into the third round, beating Florian Mayer of Germany 6-3 6-3 to advance.
World number one Federer eased into the third round with a 6-3 6-2 win over Alex Bogomolov Jr in an hour of one-sided tennis.
Having rested during last week's event in Toronto, the Swiss master showed no signs of fatigue after his Olympic exploits as he put in a near-faultless display of serving against his Russian opponent.
"It was very fast out there and so there wasn't much chance for rallies and that can be frustrating when you are on the losing side but he put up a good fight," Federer said charitably.
The top seed next plays Australia's Bernard Tomic.
Federer's Olympic team-mate Stanislas Wawrinka - the flag-bearer for Switzerland at the London Games - produced a big shock in the late match on Grandstand court, beating fourth seed David Ferrer in straight sets 6-4 6-1.
Wawrinka now meets Japan's Kei Nishikori, who downed James Blake 2-6 6-4 6-4 earlier in the day.
American Blake was joined on the scrapheap by compatriot Jesse Levine, who lost 7-5 7-6(6) to 12th seed Marin Cilic.
Tenth seed and the sole American remaining Mardy Fish had no such problems, blasting past Argentine Carlos Berlocq 6-3 6-1. The South American got off to a poor start, losing his focus when a Hawk-Eye challenge did not go his way, and allowing the home crowd hope to build up an early lead.
Fish cleaned up the first set, and was even less troubled in the second, winning through in 76 minutes.
Radek Stepanek lies in wait for the American in the last 16, having ousted eighth seed Juan Monaco 7-6(2) 6-1. In a topsy-turvy first set, both men lost their serve three times, only for Stepanek to dominate the tie-break.
And the experienced Czech player then maintained that form to wrap up the second set in double-quick time.
Sixth seed Juan Martin del Potro wore down the veteran Tommy Haas to book his place in the last 16 with a 7-5 6-2 victory.
The German's experience and mixture of shots made life difficult for the Argentine in the early exchanges, and he had his opportunities to break for the lead in the first set.
But Del Potro, the bronze medallist at London 2012, held his nerve, sealing the first set late before finishing strongly in the second.
Next for the world number nine is Viktor Troicki, who made light work of Lleyton Hewitt, sealing victory 6-2 6-0.
The Australian wildcard had overcome Mikhail Youzhny in his opening match, but fell well short of those standards in round two.
A former US Open champion, Hewitt spurned three break points which might have got him back into the contest, and Troicki was clinical when his chances arose to win the match in 61 minutes.
Lucky loser Jeremy Chardy made the most of his opportunity in Cincinnati, reaching the last 16 by sweeping past Uzbek opponent Denis Istomin 6-4 6-3, setting up a clash with third seed Andy Murray, who downed Sam Querrey 6-2 6-4.
Rounding off the day's action in the men's draw in Mason, Pablo Andujar of Spain beat seventh seed Janko Tipsarevic, who retired when trailing 6-4 4-1 and big-serving Canadian Milos Raonic saw off Marcos Baghdatis of Cyprus 6-7(6) 6-3 6-4.