The seventh-seeded Frenchwomen, who is retiring at the end of the year, suffered a 7-6 (7-5), 6-2 second-round defeat to lucky loser Tatiana Panova of Russia.
Tauziat, who has made 15 appearances in Filderstadt, was honored on the court in a post-match ceremony.
"This is one of the best tournaments on the Tour," she said. "They really look after the players. I'm really going to miss coming here."
Fourth-seeded Kim Clijsters of Belgium also was an upset victim, falling, 6-3, 4-6, 6-3, to Germany's Anke Huber.
Huber has announced she will retire following the 2002 Australian Open.
Two seeded players advanced to the quarterfinals as No. 3 Lindsay Davenport of the United States got past Anne Kremer of Luxembourg and No. 6 Justine Henin of Belgium ousted American Chanda Rubin, 7-5, 2-6, 6-3.
In a battle of unseeded players, France's Sandrine Testud dispatched Spain's Magui Serna, 6-4, 6-4.
Davenport, the 1998 winner, is seeking her fifth victory of the year. She returned from a three-month absence due to a right knee bruise to claim her third and fourth titles at Eastbourne and Los Angeles.
Henin has captured three titles this year and reached her first career Grand Slam final at Wimbledon, falling to Venus Williams.
In Friday's quarterfinals, Davenport faces No. 5 Amelia Mauresmo of France, Henin takes on Huber, Panova battles top seed and defending champion Martina Hingis of Switzerland and Testud plays No. 2 Jennifer Capriati of the United States.
Hingis is a four-time champion here, but is winless in her last 12 tournaments -- the longest drought of her career.