The 22-time major champion said that he had been experiencing pain in the area for the past week but that the injury got worse during Wednesday's quarterfinal match against Taylor Fritz, specifically while serving.
"Unfortunately, as you can imagine if I am here, I have to pull out from the tournament," Nadal told a room of reporters Thursday. "As everybody saw yesterday, I have been suffering with the pain in abdominal. I know something was not OK there, as I said yesterday."
Kyrgios, who had reached the semifinals at a Grand Slam for the first time with his win over Cristian Garin on Wednesday, will now face either top-seeded Novak Djokovic or No. 9 Cameron Norrie in Sunday's championship match.
Nadal practiced for around 45 minutes on Thursday, spending most of the time hitting forehands and backhands, and though he did practice some serves, they were at a vastly reduced speed. Spanish newspaper Marca reported Thursday that Nadal has a 7-millimeter tear in one of his abdominal muscles but that he intended to play.
Ultimately he said it came down to not believing he would be able to play his best with the injury.
"I made my decision because I believe that I can't win two matches under these circumstances," Nadal said. "I can't serve. [It's] not only that I can't serve at the right speed, it's that I can't do the normal movement to serve.
"I have to say that, imagine myself winning two matches, and for respect to myself in some way, I don't want to go out there, not be competitive enough to play at the level that I need to play to achieve my goal, and with a big chance to make the things much worse, no?"
Nadal wore tape over part of his abdomen and required treatment, including painkillers, during his five-set victory over Fritz.
Nadal, 36, was trying to win Wimbledon for the third time and the first time since 2010. He was playing in the tournament for the first time since 2019.
Having won the Australian Open and the French Open earlier this year, Nadal was vying at Wimbledon to continue his quest for a calendar Grand Slam and to take home his 23rd major title, which would have tied him with Serena Williams for the most by a player in the Open era.
Nadal said he didn't regret finishing the match Wednesday, despite the wishes of his father and sister, seated in his player box, who were urging him to retire.
"[It] was the right decision because I finished the match," he said. "I won the match. I did the things that I felt in every single moment. I am not the kind of player and the kind of person that, when you make decisions, [is] going to look back and say, I should not [have] done that, or I should do another thing ...
"[On] the other hand, I didn't want to pull out, to go out the court in the middle of a quarterfinals match. Even if, as I say yesterday, the chance of retirement stays in my mind for a long time after the first five, six games, I find a way to finish the match. Something that I am proud of. Then you confirm that you have an injury, then you make the decision thinking about your health and your future."
Nadal said he expects it will take three to four weeks to recover from the injury.
The last man in the Open Era to withdraw before a major semifinal singles match was Richard Krajicek at the 1992 Australian Open.
Information from ESPN's Simon Cambers was used in this report.