The German went down 6-3, 7-6 (7/3) to Elina Svitolina, but later revealed she had been struggling with the troublesome knee during the match.
Had Kerber won the tournament, she would have retaken the world number one spot she held for four months after winning the US Open in September, until Serena Williams wrestled it back in claiming Australian Open glory last month.
But she said she has more pressing fitness concerns ahead of the Indian Wells event starting in less than a fortnight in California.
‘Happy’ Kerber into Dubai semis, stays on target for top spot
"I'm not thinking about this. I know how it feels to be number one, I reached it once, and for sure I will try to get back there," said the 29-year-old.
"For me it's really important to be healthy, and if I play consistently the next weeks or months, then we will see what happens then. I'm not looking at the number before my name, actually."
Kerber, winner of two Grand Slams in 2016, lost for the third time in a row to Svitolina, the Ukrainian world number 13.
"This was for sure not the best day for me, but at the end I will try to forget the match as soon as possible and try to take positive things from this tournament," said Kerber.
Angelique Kerber moves closer to top ranking
The top seed produced eight double-faults and left the court for medical treatment when a set and a break down.
"I'll go home for a few days. We will see what's going on with my knee, and then the next one is Indian Wells," she added.
Her return produced moments of inspiring tennis, although two bouts of light rain added to the complications.
It finally took a winning second-set tiebreaker from the 22-year-old Svitolina to end the drama, sending the challenger into a Saturday title showdown against Caroline Wozniacki, who reached her second final in as many weeks, beating Anastasija Sevastova 6-3, 6-4.
Kerber’s campaign ends in defeat
Denmark's former world number one Wozniacki, currently 15th, took just 90 minutes to win her semi-final.
"It's been a pretty good couple of weeks for me, I'm very happy with how I have been playing. Very happy how I have managed to get through these two weeks," said Wozniacki, who lost to Czech Karolina Pliskova in the Doha final last weekend.
"It's been very tiring mentally. The fact that I have just been staying in there and keep grinding, I'm kind of proud of that.
"She definitely was a tricky opponent. I knew going into it that she was going to be difficult. She mixes the pace up. She really tries to break your rhythm. I was really pleased with how I was playing. I tried to stay aggressive and tried to mix it up, as well."
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