The Ukrainian, who is 21st seed and scheduled to play Italy's Paulo Lorenzi in the first round at Melbourne Park next week, had just lost the first-set tiebreak 7-3 when he called for the trainer.
Clutching his right knee, he decided he could not continue, leaving his big-serving Spanish opponent to claim another title after his 2010 triumph.
"It's my right knee, I had surgery on it last year and it started to feel the same as before," Dolgopolov, who reached the last eight of the Australian Open in 2011, told Channel Seven.
"The knee is locked, I'm going to get a scan and I really hope I'll be able to play but I'm not sure of that. I'm just hoping I can get out on court. That would be good for me."
Kei Nishikori, last year's champion at Kooyong, earlier completed his preparations for another tilt at becoming the first Asian to win the men's singles title at the grand slam of the Asia-Pacific.
The Japanese, seeded fifth at the Australian Open, went down 7-6 7-6 to France's Richard Gasquet, 24th seed at Melbourne Park, in the match to decide who would finish third in the traditional warm-up for the year's first grand slam.
In New Zealand, world number 16 Kevin Anderson was stunned 6-4 7-6 by Jiri Vesely in the semi-finals of the Auckland Open, the Czech qualifier out-serving the tall South African to set up a meeting with Adrian Mannarino.
Mannarino earlier won an all-French clash against Lucas Pouille 6-4 3-6 7-5 to reach what will be a first ATP final for the world number 44 and Vesely.
The players at Kooyong had to contend with windy conditions, which with added rain more seriously disrupted play over the Bass Strait in the women's singles semi-finals at the Hobart International.
Heather Watson had already endured a long rain break in her match against American eighth seed Alison Riske and the wet weather returned as she was preparing to serve at match point.
The British number one was clearly affected by the hour-long disruption and Riske saved the match point before breaking back after the resumption, albeit benefiting from a couple of line calls that Watson loudly protested.
Watson got another break straight away, however, and made no mistake with her second attempt to serve out the match, winning 6-3 7-5 to move into her second career WTA final.
American qualifier Madison Brengle joined the Briton in the title showdown after battling to a 6-4 1-6 6-3 victory over Japan's Kurumi Nara.
(Reporting by Nick Mulvenney in Sydney, editing by Peter Rutherford/John O'Brien)
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