The reigning Wimbledon champion was coasting but the 53rd-ranked Krunic mounted a stirring fight back and reeled off four of the next five games to force a tiebreak, which she claimed by a 7-3 margin to send the contest into a deciding set.
Mugurza regrouped to break the Serb in the first game of the third and was serving at 2-1 up before she collapsed on the baseline and retired immediately when she was helped off the court to receive treatment for cramping in both legs.
The early exit cost Muguruza a chance to replace Romania's Simona Halep at the top of the world rankings ahead of the Australian Open later this month but the Spaniard's immediate concern will be to get fit for the first grand slam of the year.
"I cramp very few times, but I do remember that the last time I cramped up was actually (at the Australian Open in Melbourne. Maybe it's the heat. Maybe it's the conditions. I don't know, but it's rare for me," Muguruza told reporters.
Muguruza's run of injury woes in the tournament dates back to 2015 when she withdrew on the eve of the event with an ankle problem, before a left foot injury ended her 2016 campaign and a right thigh problem led to her semi-final retirement last year.
The Spaniard admitted that the cramping started early in the second set but she was otherwise happy with her performance and the general quality of the match despite being unable to continue through the pain.
"I'm pleased because we were playing very good points and good rallies. She was playing very good," the 24-year-old added.
Krunic, meanwhile, advances to a quarter-final meeting with either Romania's Sorana Cirstea or Latvia's Anastasija Sevastova but was disappointed with the manner of her victory over Muguruza.
"I'm not happy with what happened today and I want to wish Garbine a fast recovery. I hope she gets better for the slam," she said in a courtside interview.
(Writing by John O'Brien in Singapore; Editing by Greg Stutchbury and Sudipto Ganguly)
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