"After yesterday's scan, the doctor has recommended I don't risk further injury," Sharapova, who was awarded a wildcard to compete this week in California, said in a statement on the tournament's website.
"Monday night’s crowd was so special and I wish I could continue playing but I have to make a preventative decision.”
Sharapova, playing her first match in the United States since 2015, was made to work against world number 80 Brady, needing two hours to secure the 6-1 4-6 6-0 win.
Her early exit means Ukrainian seventh seed Lesia Tsurenko advances to the third round by walkover.
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It marks the second time in three months that the five-times grand slam champion's comeback has been interrupted by injury as she also retired from her second round match at the Italian Open in mid-May after injuring her left thigh.
Sharapova, banned after testing positive for heart drug meldonium at the 2016 Australian Open, has had mixed results since re-joining the WTA Tour.
The 30-year-old Russian reached the semi-finals as a wildcard in Stuttgart but fell in the second round at Madrid to Canada's Eugenie Bouchard who days earlier had labelled the Russian a "cheater."
(Reporting by Frank Pingue in Toronto; Editing by Robin Pomeroy/Steve Keating)
