"I crashed in the fifth stage and I felt pain in my left testicle and yesterday we spoke with the doctor of the Tour de France and we decided to do some analysis to the hospital and the examination gave me bad news," said Basso, who was addressing the media ahead of his Tinkoff-Saxo team leader Alberto Contador of Spain.
"I have a small cancer in the left testicle so it's easy to understand I have to stop and go back to Italy."
Basso was to undergo surgery in Milan on Tuesday.
Contador, who is attempting a rare Giro/Tour de France double, would not discuss the race, in which he sits fifth overall, one minute three seconds behind leader Chris Froome.
"I have grown closer to Ivan in the past weeks and this is terrible news," said Contador, with tears in his eyes.
Basso looked on course for Tour glory when he won the white jersey for the best Under-25 rider in 2002, in an era dominated by the disgraced Lance Armstrong, a testicular cancer survivor.
"Thinking about Ivan Basso and wishing him the very best as he embarks on his cancer journey," Armstrong said on Twitter.
He never won the world's greatest race, however, finishing third and second overall in 2004 and 2005 respectively.
Basso won the Giro twice -- his only grand tour titles -- thanks to impressive climbing performances.
His career, however, was stained with a two-year ban for his implication in the Operation Puerto blood-doping scandal.
Basso admitted to "attempted doping" in 2007 and was hit by a backdated suspension.
He won the Giro less than two years after his comeback from suspension but only managed seventh in the 2007 Tour. He was one of Contador's lieutenants on this year's Tour having helped the Spaniard win the Giro last month.
(Editing by Ed Osmond)
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