Dimitrov, the 19th seed, won the opening two sets and held serve with an ace in the third but then fell to the ground, saying: "my pec, my pec" as a concerned Sinner walked round the net to ask what was wrong.
Sinner stayed by the side of Dimitrov who shed tears while he received treatment and the Bulgarian eventually threw in the towel and walked off to a standing ovation from the Centre Court crowd.
"I don't know what to say because he's an incredible player. I think we all saw this today," Sinner said of his opponent, who had withdrawn from his past four Grand Slams with injuries.
"He's been so unlucky in the past couple of years. He's an incredible player, a good friend of mine also, and we understand each other very well off the court too.
"Seeing him in this position... if there would be a chance that he could play in the next round, he would deserve it. Now I hope he has a speedy recovery. Very, very unlucky from his side.
"I don't take this as a win at all... just an unfortunate moment to witness for all of us."
Sinner arrived for the Centre Court clash having not dropped serve in 36 games, but Dimitrov broke him on the first attempt to grab a 2-0 lead and the elegant 34-year-old played near-flawless tennis to close out the opening set and leave the crowd stunned.
Troubled by a right elbow problem following a fall earlier in the clash, Sinner took a medical timeout five games into the second set after being jolted again by 19th seed Dimitrov, who shook off dropping his own serve late on to double his lead.
Pushed into a corner, Sinner came out fighting but the match ended in anticlimactic fashion in the third set and the Italian now faces American 10th seed Ben Shelton in the quarter-finals.