Nalbandian - playing in his first tournament since hip surgery nine months ago - withdrew from his quarterfinal against fifth-seeded Albert Montanes with a right-leg abductor injury, giving the Spaniard a spot in the semifinals.
In second-round matches Thursday, sixth-seeded Igor Andreev of Russia defeated Marcel Granollers of Spain 3-6, 6-3, 6-4, and top-seeded David Ferrer of Spain beat Portugal's Frederico Gil 6-3, 6-0.
Story continues below ↓advertisement | your ad hereEighth-seeded Horacio Zeballos of Argentina overcame Spaniard Carlos Moya 6-4, 6-4, to reach the quarterfinals.
Nalbandian's Web site quoted tournament director Martin Jaite as saying Nalbandian was retiring on the recommendation of doctors who conducted a series of tests on him.
Nalbandian said after Wednesday's victory over Spain's David Gimeno-Traver that his trainer had suggested he pull out of the match when he injured his leg in the second set. He said he probably would have pulled out had the event not been his home tournament.
"But I decided to play for the sake of people who have always supported me," Nalbandian said. "I took a risk but it went well."
The injury could leave Nalbandian out of the Argentine Davis Cup team that will play Sweden in Stockholm from March 5-7.
Nalbandian had hip surgery in May and had hoped to return in January for a tournament at Auckland, New Zealand, but he strained abdominal muscles while warming up for a match.
Nalbandian was a Wimbledon finalist in 2002, and reached the French Open semifinals in 2004 and 2006.
© 2010 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.Ferrer, Ferrero open with wins in Buenos AiresCazorla hit with injury blow