The Canadian teen had earlier stunned third seed and defending champion Naomi Osaka.
The Two-time champion's title defence ended in tears, as she suffered a stunning defeat in the third round to Canadian Leylah Fernandez.
The tennis event has now lost both of its top draw cards after world number one and Wimbledon champion Ash Barty was beaten in Sunday's first round.
The build-up to the Games has been marked by a string of gaffes by the organisers.
Her agent said that the world No. 2 will be ready for the Tokyo Olympics.
Removing a player from a championship for expressing difficulty to meet the media is a crude and callous response.
The 2019 champion retired from her second round match against Poland's Magda Linette with an injury.
Osaka said in the build-up to the tournament that she would not attend the obligatory press conferences for players after matches, saying the questioning by journalists impacts her mental well-being.
Kerber's poor record at the French Open got no help when the German was knocked out in the first round by Ukrainian qualifier Anhelina Kalinina.
Naomi's total earnings amounted to $55.2 million, of which just $5.2 million was from prize money.