The 20-year-old Bouchard, playing for the first time since losing in the Wimbledon final to Petra Kvitova last month, faltered badly in front of her native Montreal crowd.
Her 6-0 2-6 6-0 loss came after the event suffered a seven-hour power outage that shut down scoreboards and umpires' microphones.
"I was feeling the pressure on the court and I was feeling kind of match rusty," Bouchard said. "But I knew this coming into the match, so I can't use that as excuses. I knew it would be kind of a difficult situation."
Bouchard suffered her own issues from the outset as she struggled with her serve and failed to claim a game in the opener.
She rebounded to dominate the second set but fell away badly in the decider, ending home fans' hopes of an anticipated quarter-final showdown against top-ranked Serena Williams.
The in-form Bouchard is the only player to have reached the semi-finals of the first three grand slams of the season while defending champion Serena has won this tournament three times.
Serena had the day off but her older sister Venus fought her way to a three-set victory against Anastasia Pavlyuchenkova 6-1 3-6 6-2 despite the electrical issues.
"It was like going back to the southern California juniors," Venus said of the power outages.
"But I tried to think of it as positive. It felt good to win the match and hopefully gain some momentum."
In other matches, Caroline Wozniacki made easy work of Daniel Hantuchova in a 6-1 6-1 triumph, while third-seed Agnieszka Radwanska defeated Barbora Zahlavova-Strycova 6-4 6-4 and ninth-seed Ana Ivanovic routed Timea Bacsinszky 6-1 6-2.
Montreal Cup results
8-Victoria Azarenka (Belarus) beat Alize Cornet (France) 6-4 2-6 6-4
Shelby Rogers (U.S.) beat 5-Eugenie Bouchard (Canada) 6-0 2-6 6-0
3-Agnieszka Radwanska (Poland) beat Barbora Zahlavova Strycova (Czech Republic) 6-4 6-4
Garbine Muguruza Blanco (Spain) beat Stephanie Dubois (Canada) 6-1 6-7(4) 6-2
Madison Keys (U.S.) beat Svetlana Kuznetsova (Russia) 6-1 3-2 (Kuznetsova retired)
9-Ana Ivanovic (Serbia) beat Timea Bacsinszky (Switzerland) 6-1 6-2
14-Carla Suarez Navarro (Spain) beat Bojana Jovanovski (Serbia) 6-4 6-3
11-Caroline Wozniacki (Denmark) beat Daniela Hantuchova (Slovakia) 6-1 6-1
Caroline Garcia (France) beat Karin Knapp (Italy) 6-2 6-7(6) 6-1
Karolina Pliskova (Czech Republic) beat Yanina Wickmayer (Belgium) 6-2 6-1
Elena Vesnina (Russia) beat Camila Giorgi (Italy) 6-4 1-6 7-6(1)
Venus Williams (U.S.) beat Anastasia Pavlyuchenkova (Russia) 6-1 3-6 6-2
Casey Dellacqua (Australia) beat Kirsten Flipkens (Belgium) 6-0 4-6 6-2
Coco Vandeweghe (U.S.) beat Zhang Shuai (China) 6-2 6-4
Samantha Stosur (Australia) beat Monica Puig (Puerto Rico) 6-2 6-2
Ekaterina Makarova (Russia) beat Romina Oprandi (Switzerland) 6-4 6-0
- Sports & Recreation
- Anastasia Pavlyuchenkova