Nadal was trailing Australian wild-card Chris Guccione 6-5 in the first set when he called it quits.
Nadal, beaten in the semi-finals at Chennai last week, called for medical treatment after the seventh game but managed only four more before he was forced to retire.
He told a news conference he had been failing pain in his right inner thigh but that his decision to pull out was only precautionary.
"The trainer told me if I kept playing I might make it worse ... and I wanted to be 100 percent for the Australian Open," he said.
Guccione, who reached his first ATP final in Adelaide last week, said he had no inkling Nadal was injured until he called for help but had no doubts the complaint was genuine.
"I didn't know anything about it ... I couldn't tell from where I was," the lanky Australian said.
"He's got no reason to pull out this early. You want to win the tournament, that's why he came here."
James Blake made a flying start to his defence of his title with a 6-3 6-4 first-round win over fellow American Kevin Kim at the Olympic tennis centre.
Blake enjoyed his best season on the professional circuit last year, winning five titles, but said his aim for 2007 was to peak at the grand slams.
"It's not going to be easy, but I would love to have as much success as I had here last year and then maybe take it to Melbourne with even more confidence and, hopefully, go a little further," he said.
"I'm definitely looking forward to this tournament and the whole rest of the Australian summer."
Czech qualifier Ivo Minar advanced to the second round after Thailand's Paradorn Srichaphan retired with a wrist injury while trailling 6-2 3-0.
Sixth seed Richard Gasquet of France defeated Germany's Benjamin Becker 6-1 6-4.