The top-ranked Spaniard had his knee taped during the third set of his third-round win over Pablo Cuevas of Uruguay on Thursday and then decided the next day he could not go against Serbian qualifier Filip Krajinovic.
"I have to pull out," Nadal said at a press conference. "Of course, it's a very hard decision for me, especially -- pulling out from any event is tough, but especially from here, from Paris. As I said a lot of times, it's the most important city in my career, without a doubt."
The 31-year-old Nadal did not commit that he will be able to play at the ATP Finals in London starting Nov. 12.
"It's not about London, it's about the longer term," Nadal said. "It's important to play tennis as long as possible."
On Wednesday, Nadal clinched the year-end No. 1 ATP ranking with his second-round victory against South Korea's Hyeon Chung.
Nadal was the first player to qualify for the ATP Finals, doing so in June. The year-end finale will take place at The O2 in London from Nov. 12-19, but Nadal said he is not focusing on the London event at the moment.
"I am sad enough to pull out from here. It's a tournament that I have a lot of people that I know very well around the organization, all the same people that organize Roland Garros," Nadal said. "I feel like home here and for the relationship that I have with the French Federation, with everybody, it's a very tough day for me. So it's not the right day to talk about London.
"Only thing I'm going to say, I'm going to do my treatment, do my best to be playing in London, but I cannot talk about that now because it's a day that is tough enough for me to pull out from here."
Nadal came back from a wrist injury last season to win this year's French Open for the 10th time and the U.S. Open for the third time, giving him 16 Grand Slam titles. He was attempting to win his first ATP World Tour Masters 1000 title in Paris.
"I'm going to go back, check again with the doctors (like) I did after Shanghai," Nadal said. "Let's see. I'm going to do my treatment. In the past it worked well."