The 40-year-old quit Chinese side Shanghai SIPG last November, announcing his intention to compete in the 2018 edition of the motorsport event.
Villas-Boas had been making steady progress in the competition until he suffered a back injury during the fourth stage on Tuesday when his Toyota Hilux hit a sand dune.
"Andre was taken to the hospital with a back injury," Overdrive team director Jean-Marc Fortin told reporters. "It was unfortunate for Andre, who was making a very positive debut in the Dakar."
During his time at Spurs, Villas-Boas guided the club to a then-record 72 points in the Premier League before he was relieved of his duties in December 2013.