This latest injury will cost him his No. 1 ranking, which goes back to longtime rival Novak Djokovic next week.
The giant American saved four match points before the 22-year-old Khachanov, who had already staved off two himself, finally threaded a backhand victor past the net-rushing Isner to win after almost 2-1/2 hours of massive hitting. Cilic needs to beat Djokovic on Friday for a guaranteed spot in the ATP Finals later this month in London.
Nadal was also non-committal when asked about his decision and indicated it was hard to pull out as they had signed the deal to play the exhibition match over a year ago. "After that, I couldn't get any points on return, so I took some risks and played more aggressive, and I did it".
Khachanov saved two match points in a serving fest against John Isner 6-4, 6-7 (9), 7-6 (8).
Djokovic is seeking to reclaim the top ranking from Rafael Nadal at a tournament Nadal has never won.
Cilic had earlier looked in strikingly good form when beating Grigor Dimitrov 7-6 (5) 6-4.
In the first quarterfinal of the day, young big men Alexander Zverev and Karen Khachanov collide. He leads the Italian 3-0 in matchups. Djokovic and Nadal will both attempt to become five-time year-end World No. 1s at the Nitto ATP Finals, to be held at The O2 in London from 11-18 November.
He will play Damir Dzumhur in the third round in Paris, an event he has won a record four times. There were doubts Federer would play after a grueling past week which saw him clinch his ninth victory at the Swiss Indoors and 99th overall. I've practiced with the guys and felt, in terms of tennis, better than I thought one week ago. But the third-ranked Federer feels comfortable with it.
"I didn't want to play there at that time, " the 20-time Grand Slam champion said.
"I'm aware of what's happening and it's sad. So that's little bit more motivation to be here", he added.
"So of course right now I'm aware of it and I'm going to give my very best to try to achieve it". I did win, so I had the mike, I could talk to the public.
Roger Federer has revealed he refused the $1 million offer from the organizers of the government-sponsored event to play in Jeddah, Saudi Arabia, in an exhibition match on December 22.
Roger Federer vs Kei Nishikori takes place on Thursday evening in Paris.