The Canadian has been suffering since the stage 8 time trial and had slipped to 38th place after 12 stages, 32 minutes and 55 seconds down on overall leader Vincenzo Nibali of Italy after suffering badly in the first mountain stages of the race last weekend.
Stage 9 saw him in difficulty on the final two climbs but his Garmin-Sharp team and Hesjedal believed that the rest day would provide respite and recuperation for the 2012 champion. However, stage 10 saw him suffer again - he was not able to get the power he needed on the first climb of the day, and he struggled to finish the stage.
Conditions on Thursday's rainy, cold stage combined with Hesjedal's deteriorating physical condition proved too much and the defending champion will not start Friday's 254km stage from Busseto to Cherasco.
"It's heartbreaking," said Hesjedal. "I want to be here for my team and for all the people who have supported me to get me here to this point. I built my entire season around the Giro and I came here feeling great, but I have been suffering since the TT. We're working on it, but we're not sure what's wrong.
“There's a virus that's been going around, so it could be that, or severe allergies, or going too deep on the TT combined with both – whatever it is, I'm only getting worse. Yesterday's stage was just too much for me,
“I fought to get through it and I know everyone suffered but after seeing the medical staff last night, I also know that it is time for me to go home, get some tests done and get healthy again. I have tried my best to honour the number one bib number, the race, my team and fans and its devastating to leave this way. Going home now is heartbreaking.”
Hesjedal became his country's first Giro d'Italia winner when he edged out Spain's Joaquim Rodriguez by 16 seconds after a ferocious two-week duel through the mountains, with the Canadian gaining the upper hand on the final day's time trial in Milan.
Hesjedal's withdrawal follows that of Tour de France winner Bradley Wiggins and France national champion Nacer Bouhanni, who announced on Thursday evening that he was quitting the 21-stage race.