World No. 2 Muguruza of Spain -- ranked 51 spots higher than her opponent -- led 7-5 6-7 (3-7) 2-1 before succumbing to suspected chronic leg cramps at a humid Pat Rafter Arena.
The reigning Wimbledon champion fell to the ground clutching her leg while attempting to make a backhand return.
The two-time Grand Slam winner received medical treatment before deciding to pull the pin in her only event ahead of the Australian Open.
Muguruza had hoped to reclaim the world No. 1 ranking she held for four weeks in 2017 by making the Brisbane final.
The Spaniard has now retired from her third straight Brisbane International tournament due to injury. Both competitors were feeling the pinch at a steamy Pat Rafter Arena in the second-round clash that had lasted more than two hours.
Muguruza trailed 3-1 in the first set but broke back twice after a quick courtside chat with coach Sam Sumyk.
She still needed seven set points to finally clinch the first in a marathon 12th game that went for 17 minutes.
Muguruza served for the match up 5-3, only to be broken by the tenacious Serb to send the second set into a tiebreak which Krunic claimed 7-3.
The Spaniard looked back on track when she broke Krunic in the opening game of the third set before disaster struck.