The opponents were in the third and deciding set at Rome’s Foro Italico when Kyrgios got worked up over spectators moving in the stands, particularly during his service motion.
The controversial Canberran complained to officials and to his own coaching team, causing him to receive a game penalty for unsportsmanlike conduct.
The penalty triggered the Australian’s meltdown, in which he slammed down his racket, kicked a water bottle and hurled a chair on to the court.
The umpire called the referee to court but, before he could be officially defaulted, Kyrgios said, “I’m done”, packed up his bag and walked off the court, to loud whistles and boos.
Ruud was leading 6-3, 6-7,(5), 2-1 and will face Juan Martín del Potro in the third round.
Kyrgios later took to Instagram to apologise for his actions.
“Very eventful day to say the least,” he wrote.
“Emotions got the better of me and I just wanted to say that the atmosphere was crazy out there today, just super unfortunate that it had to end in a default. Sorry Roma, see you again, maybe.”
Kyrgios will be stripped of his €33,635 in prize money from the tournament and 45 ATP points.
He was also fined €20,000 for the three unsportsmanlike conduct penalties he received during the match and must cover the cost of his hospitality during the tournament.
He could face suspension from the ATP.