Seeking her fourth title here in five years, Hingis was closing in on a victory over Belgian qualifier Justine Henin when her opponent retired in the second set with an inflamed right foot. Hingis was leading, 6-3, 3-0.
Fourth seed Arantxa Sanchez-Vicario of Spain struggled in her second-round match with Cara Black of Zimbabwe before prevailing, 6-2, 3-6, 6-4.
Fifth seed Amanda Coetzer of South Africa also reached the quarterfinals by defeating Patty Schnyder of Switzerland, 7-5, 6-4.
Unseeded Kim Clijsters of Belgium followed up Tuesday's upset of sixth seed Anna Kournikova with a 7-6 (11-9), 6-3 second-round win over Jana Kandarr of Germany.
Hingis was two points away from defeating eventual champion Venus Williams in the U.S. Open semifinals, but lost four straight games to suffer a heartbreaking defeat. She did not represent Switzerland at the Olympic Games in Sydney, citing a hectic schedule that would not allow her to make the trip to Australia.
The 20-year-old Hingis has won five titles this season and has compiled a 59-9 record. She defeated Mary Pierce, 6-4, 6-1, in last year's final and also won this event in 1996-97.
After falling in the quarterfinals of the Olympics, Sanchez-Vicario is seeking her first title of the year. She reached the final at the Family Circle Cup and Betty Barclay Cup during the spring claycourt season.
The 28-year-old Spaniard is making her sixth appearance at this event, having advanced to the semifinals in 1992 and 1998.
In first-round action, eighth seed Dominique Van Roost of Belgium got past Anne Kremer of Luxembourg, 7-5, 7-6 (7-4); Asa Carlsson of Sweden downed Magui Serna of Spain, 6-3, 6-3; and Magdalena Maleeva of Bulgaria held off Sabine Appelmans of Belgium, 6-4, 5-7, 7-5.
First prize is $87,000.