The 20-year-old Briton, who stunned the tennis world when she won the US Open in 2021 as a qualifier, retired with an ankle injury at the start of the third set against Viktoria Kuzmova in the last 16.
Raducanu, who has suffered a series of injuries since her New York triumph, won the first set 6-0 before losing the second 7-5.
She then received treatment before declaring that she could not continue.
The Australian Open starts on January 16, leaving the world number 78 facing a race to be fit in time.
Veteran Venus Williams was another high-profile casualty on a rain-marred day at the Auckland Classic.
The 42-year-old American said it had been "more about surviving" than tennis after she blew a 5-3 third-set lead against China's unseeded Zhu Lin.
United States teenager Coco Gauff, the top seed in Auckland and emerging face of women's tennis, meanwhile marched relentlessly on.
On another day of weather disruptions in which the outdoor matches were concluded indoors, Williams was outlasted by Zhu in a match badly drawn out by rain stoppages.
"Outside it was really tough, it was rainy, windy. It was tennis, but it was more about surviving instead of playing great," said Williams, a wildcard for the Australian Open.
"Indoors it was completely different but I got to hit a lot of balls, so that's important."
The seven-times Grand Slam champion was eyeing her first quarter-final berth since 2019 but her serve was broken twice in the closing stages as the 28-year-old Zhu took command to win 3-6, 6-2, 7-5.
"Being the first match (of the day) is like being a guinea pig. I was the first one out there and seeing what happens," said Williams.
In the quarter-finals Zhu will face Gauff, who beat 2020 Australia Open winner Sofia Kenin 6-4, 6-4.
The 18-year-old Gauff avenged a loss the only other time the Americans clashed -- at the Australian Open three years ago when Kenin claimed the title.
In the first set Gauff raced to a 4-1 lead before Kenin began to fire. The second set went with serve until Gauff's critical break at 5-4.
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