Former US Open champion Raducanu swept the first set in 22 minutes but faltered in the second and had her left ankle examined during a medical timeout, before leaving the court in tears after being unable to complete the first point of the decider.
The Australian Open begins on January 16.
Earlier, Coco Gauff (18) beat fellow American Sofia Kenin (24) 6-4 6-4 to set up a quarter-final match against China's Zhu Lin (28), who outlasted Venus Williams (42) 3-6 6-2 7-5 in a rain-hit match that ran two hours and 23 minutes.
Williams served for the match at 5-4 in the final set but Zhu broke and then fended off four break points before closing out the victory.
At the Adelaide International 1 WTA 500 event, two-time Australian Open champion Victoria Azarenka (33) saw off Zheng Qinwen (20) 6-2 7-5 on Thursday to reach the quarter-finals alongside unseeded duo Irina-Camelia Begu (32) and Linda Noskova (18).
China's Zheng, who was named WTA Newcomer of the Year in 2022, sent down 10 aces and 34 winners but also made 35 unforced errors at the Australian Open warm-up event.
"She's a great talent," said former world number one Azarenka. "I feel like she's going to be a really, really good player.
"I thought that I stuck to my game plan pretty well today ... I was consistent, I was taking my chances when I could. I kept creating more chances. I was a lot more aggressive, a bit more comfortable today on court."
Azarenka will next face Czech teenager Noskova, who followed up her first-round upset of Daria Kasatkina with a 6-2 6-2 win over fellow qualifier Clair Liu (22).
Romanian Begu reached quarters with a 6-3 6-0 upset of seventh seed Jelena Ostapenko (25), who made 41 unforced errors in an erratic display.
Begu won 11 straight games to overturn a 3-1 first-set deficit and wrap up the win in 73 minutes. She will take on fourth seed Veronika Kudermetova (25) for a place in the semi-finals.
Ons Jabeur (28), runner-up at Wimbledon and the US Open, will play Sorana Cirstea (32) later on Thursday.
