World number one Nadal, who has suffered from knee and wrist injuries throughout his career, decided to withdraw on Friday morning after having his right knee strapped during his third-round win over Pablo Cuevas.
He did not say if he would be fit for the Tour Finals in London later this month.
"For me it's not about London. For me it's about longer term," the 31-year-old, whose withdrawal allowed Serbian qualifier Filip Krajinovic to reach the semi-finals, told a press conference. “Yesterday (Thursday), the pain was very strong but it was not the moment to stop. I had treatment last night to try and be able to play today... But unfortunately it was impossible for me to return to the court in the same condition as last night. It is a sad day for me."
Nadal has fought back this year from a series of injuries, winning the French and US Open titles.
He became the oldest man to secure top spot in the end of season rankings when he beat Hyeon Chung in his opening match on Wednesday.
"I'm going to do my treatment, do my best to be playing in London, but I cannot talk about that now because (it) is a day that is tough enough for me to pull out from here," he added.
Tournament director Guy Forget was not so sure Nadal would be fit in less than two weeks' time.
"I believe he's quite sceptical about his chances of playing in London now, and he came to Paris all the same," Forget said.
Meanwhile, ninth seed John Isner ended Juan Martin del Potro's World Tour Finals hopes with a 6-4, 6-7 (5/7), 6-4 victory.
Isner will qualify ahead of Spaniard Pablo Carreno Busta for the season-ending eight-man event in London if he lifts the title in the French capital on Sunday.
Last year's runner-up Isner will face Krajinovic, who will be playing his first ATP semi-final of the season, on Saturday.
His compatriot Jack Sock can also snatch a ticket to London with tournament victory in Paris, and he takes on Fernando Verdasco in the last quarter-final later on Friday.
Del Potro struggled to find his best form as a run of 25 matches since the start of the US Open in August caught up with him.
"I'm sad of course, I was close to qualifying," he said. "But at the same time, a few weeks ago I didn't expect to be in this position at all. I'm exhausted, I gave it everything. In the third set, I didn't have much left in my legs."
French journeyman Julien Benneteau stunned 2014 US Open champion Marin Cilic 7-6 (7/5), 7-5 to send a partisan home crowd into raptures.
The 35-year-old had not managed a win over a top-10 player since 2014 before this week, but has now claimed two in as many days after knocking out seventh seed David Goffin in the last 16.
Third seed Cilic led 5-2 in the first set, but the world number 83 saved a set point on his opponent's serve before taking a tie-break.
Benneteau, playing in just his second Masters event of the season after being given a wildcard, let out a huge roar when he saved a break point and held to move within a game of victory in the second set.
Cilic made Benneteau wait until the 12th game, but a forehand winner clinched one of the biggest wins of his career.
COMMENTS
Comments are moderated and generally will be posted if they are on-topic and not abusive.
For more information, please see our Comments FAQ