The Jumbo-Visma rider lay 53rd overall after losing 11 minutes on Tuesday's stage and said "it made no sense to continue" the race.
The Dutchman entered the Vuelta as co-leader alongside Primož Roglič, who currently lies fourth on GC. However, he lost time on stage 1 and a further eight minutes on stage 2 to Lekunberri, saying afterwards that he felt "empty - no energy", blaming his condition on a busy schedule since racing restarted in July.
Dumoulin finished seventh overall at the Tour de France after working for Roglic but was happy to be back on form after missing the second half of the 2019 season due to a knee injury incurred at the Giro d'Italia, and then the 2020 spring races due to illness.
He has now agreed with team coaching staff that it's better to take time off and focus on next season rather than continue at the Vuelta.
"Both our coaching staff and I think it is the best choice to get off the bike," Dumoulin said. "At the start of the Vuelta I already felt tired and that feeling remained.
"It makes no sense for me to continue, because then I might put a strain on next season. It is not desirable to leave the Vuelta, but this is the right choice. We can all agree on that. With Primož we are in good shape in the general classification. Hopefully the team can take home the win."
Jumbo-Visma directeur sportif Merijn Zeeman was disappointed that Dumoulin was leaving the race but noted that his fatigue was increasing day after day.
"It is a pity that Tom is going home," he said. "Every day we monitored his fatigue and it kept increasing. Despite this, he played an important part in the team and did a good job.
"Although his short participation in the Vuelta has been a good investment for 2021, we now see that we are encountering limits and we take the responsibility that comes with it."
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