Contador, who had a fever in the morning and had crashed twice in the two opening stages, got off his bike and stepped into his Tinkoff team car with about 104km left in the 184.5km ride from Vielha Val d'Aran.
The Spaniard, who was 20th overall, 3:12 off the pace, had launched an early attack along with compatriot Alejandro Valverde as they looked to unsettle overall leader Chris Froome.
Contador, one of only six men with titles in all three grand tours (France, Italy, Spain), quickly faded away though and rolled down to his team car several times.
He called it quits on the second of the day's four climbs in the Pyrenees.
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"It's bad news for me, it was my last chance to win the Tour de France," said team owner Oleg Tinkov, who is pulling out of cycling at the end of the year.
"But who knows maybe I'll come back in a few years."
Contador, 33, crashed out of the Tour in 2014 and finished fifth last year after winning the Giro d'Italia.
(Reporting by Julien Pretot; editing by Martyn Herman)
