The top seed called for his trainer to assess a hip issue in the fourth set and struggled against his opponent thereafter, eventually handing Cilic a tie against British number two Kyle Edmund.
Nadal and Cilic sparred early on in the match, levelling the first set at 3-3 before the Spaniard powered through to a 6-3 victory. Cilic then matched his opponent in the second set, sealing a set win with an ace.
The encounter began to take shape when the players could not be separated in the third set - Nadal took the lead twice to lead 5-4 before being pegged back into a tie-break at 6-6.
World number one Nadal won the break, restoring his overall lead in the match, before Cilic responded in the fourth set. The Croat stormed into a 4-1 lead, before Nadal called for the trainer.
Cilic took advantage of Nadal's first stoppage, forcing a deciding set with 6-2 victory and, at the beginning of the fifth set, the Spaniard continued to be affected by his thigh issue.
Cilic took the opening two games before Nadal called time on the match, retiring after a bruising encounter.