The double Tour champion fell on the descent from Le Petit Ballon and spent several minutes being treated by race doctors, blood dripping from his right knee.
The Spaniard got back on his bike but after climbing the category-one Col du Platzerwasel with the help of his Tinkoff-Saxo team mates, Contador dismounted again and stepped into his team car.
The peloton, led by his main rival Vincenzo Nibali's Astana team, was already some four minutes ahead.
"Alberto crashed badly. His right knee is seriously injured. The crash has been violent. I have his shoe with me, it's completely destroyed," said Contador's sports director Philippe Mauduit.
"According to some rumours, his bike has been broken but that's not the case. A bike fell from our racks after we fixed Nicolas Roche's bike. It's obviously too early to establish a diagnostic for Alberto. Once he'll reach the finish, he'll undergo an X-ray examination.
"Before pulling out, he told us he was in awful pain and he couldn't go any further on his bike. It's a pity because everything had gone well since the beginning of the Tour. We had a plan and today's race was unfolding exactly as we wanted," added Mauduit.
"In a fraction of a second, it all fell apart, so we're immensely sad."
Contador was the second top favourite to pull out of this year's race after reigning champion Chris Froome of Britain crashed during the fifth stage.
Froome sent his rival a message of support on Twitter, recognising Contador's exit was a "big loss for the TDF today.
"Recover well @albertocontador and I hope to see you at the Vuelta," added the Briton, referring to Contador's home race in Spain.
Tinkoff-Saxo issued a statement confirming Contador's withdrawal due to injury.
"After receiving medical care and a new bike, Alberto was determined to get back on the bike and quickly continued in an attempt to close the gap to the peloton," the team said.
"Tinkoff-Saxo's attempt to bring Alberto back in the peloton was made difficult by the mountainous terrain and the high speed up front. After 20 km of chasing, Alberto was not able to pedal and abandoned the race due to his knee injury."
Contador had started the day ninth overall, 4:08 behind France's Tony Gallopin and 2:34 behind Nibali.
- Sports & Recreation