The combustible home hero was grimacing from an abdominal injury and fired expletives at his coaching box as he was bundled out by Britain's Jacob Fearnley 7-6(3), 6-3, 7-6(2) on his favourite John Cain Arena.
"Realistically I can't really see myself probably playing singles again here," a crestfallen Kyrgios told reporters.
"I didn't want to just throw in the towel and walk off or retire.
"I was hurting physically. I respect my opponent. The fans waited hours to come to see me play."
Fearnley managed to subdue Melbourne's notoriously noisy night crowd with a controlled victory over the 2022 Wimbledon finalist.
"I'm sorry for Nick," said Fearnley. "I could tell he was dealing with some stuff."
The Australian only made his comeback after 18 months out in Brisbane earlier this month following knee surgery and wrist reconstruction.
Kyrgios withdrew from an exhibition match against Novak Djokovic four days ago with an abdominal strain, raising fresh concerns about his fitness.
The worries were confirmed when, in his first Australian Open match since 2022, Kyrgios spoke to physios multiple times in the second set after wincing in pain while serving.
"With my physical state going into the match, I knew that I was going to be really hindered with my serve," said Kyrgios.
"But just seeing the fans line up for four, five hours, just the amount of people that were there supporting me, it was hard to kind of throw the towel in.
"Would have been really easy to kind of just roll over.
"It's obviously heartbreaking because I feel like my level's there," added Kyrgios, who confirmed that he would still play doubles with fellow Australian Thanasi Kokkinakis.
"We've won this event before. We owe it to each other I think to go out there in front of the crowd and have a bit of fun."