The Serb claimed her fourth title of the year on Sunday, but any hopes of back-to-back tournament victories are over as a thigh injury ended her challenge at the WTA Premier event.
Ivanovic started well to win the opening three games of the match before Anastasia Pavlyuchenkova responded.
Pavlyuchenkova, the world number 30, broke her opponent twice to take the opening set, although she wasted four set points before taking the opener.
The second saw Ivanovic's injury began to take its toll.
She gave 12 break chances to the Russian over the course of the set and, despite saving nine of them, she was unable to stop Pavlyuchenkova taking control.
A break in the 11th game gave the 23-year-old a chance to serve for the match, but that was not needed as Ivanovic was forced to retire through injury.
It was a bad day for the seeded players as another four fell on Monday, including world number six Agnieszka Radwanska.
The Pole, seeded fifth for the tournament, started well against Caroline Garcia to take the opening set, but the Frenchwoman stormed back to secure a 3-6 7-6 (7-4) 7-6 (9-7) win in the second round.
Maria Sharapova avoided upset in round two as she came from a set down against Svetlana Kuznetsova to win 3-6 6-2 6-2.
Meanwhile, in the first round, Flavia Pennetta and Lucie Safarova made early exits as they were beaten by Jarmila Gajdosova and Sabine Lisicki respectively, while Madison Keys progressed at the expense of 12th seed Dominika Cibulkova after the Slovak suffered an ankle injury at one set all.
Sara Errani showed gritty resolve to beat Heather Watson 7-5 6-4. The match appeared to heading to a decider when Watson surged 4-1 ahead in the second set, but Errani kept her cool to break three times in a row and swing the tie back in her favour.
Jelena Jankovic progressed at the expense of Christina McHale 6-4 6-4, while there were straight-set wins in the first round for Coco Vandeweghe, Timea Bacsinszky, Carla Suarez Navarro, Alize Cornet, Mona Barthel, Casey Dellacqua and Karolina Pliskova.
Garbine Muguruza was pushed all the way as she came from a set down to beat fellow Spaniard Maria-Teresa Torro-Flor 4-6 6-4 6-4.