The 18-year-old Canadian, the youngest man in the draw, slumped to a 6-4, 7-5, 6-3 defeat to France's Ugo Humbert, a fellow tournament debutant.
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Auger-Aliassime was bidding to become the youngest player in the Wimbledon last 16 since Bernard Tomic in 2011.
But once he let slip a 5-2 lead in the second set, his game fell apart.
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"Today, it's weird to describe. Pressure got to me, and it got to a point where it was a bit embarrassing," said Auger-Aliassime.
"It was just tough. I just wasn't finding ways. I think he just did what he had to do. From my end it was pretty embarrassing."
Left-handed Humbert, the world number 66, will face four-time champion Novak Djokovic in the last 16 on Monday.
Until this year, the 20-year-old Frenchman had never played a grass court match either as a junior or professional.
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