Landa found himself some six minutes in arrears going over the summit of the Passo della Collina inside the first 40 kilometres of the 219-kilometre stage from Campi Bisenzio to Sestola in the Apennines.
Landa's fellow Basque team-mates David Lopez and Mikel Nieve dropped back to help pace their leader back -- and the duo faced a stiff chase back onto the peloton after Landa threw in the towel and climbed into the Sky team car at the start of the second third-category climb of Pietracolora around 30 kilometres later.
Landa, 26, joined Sky from Astana at the end of last season and was the British outfit's leader for the Giro and one of the pre-race favourites to win the pink jersey.
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"Mikel was ill overnight but we spoke this morning and he started today's stage with the hope of being able to pull through," said Team Sky manager Sir Dave Brailsford.
"It was pretty clear that the illness had badly affected him and that he wasn't going to be able to continue. We are really disappointed for Mikel, who was riding well and looking forward to attacking in the mountains and animating the race. However, we came here as a team and we'll continue as a team. There is a long way still to go, and although our focus was on Mikel, there's plenty of time for us to still make an impact at this Giro."
Commenting on Mikel Landa's illness, Team Doctor Inigo Sarriegui said: "Mikel woke up early this morning feeling unwell with abdominal pains. It appears as though he has a viral gastroenteritis.
"We will assess him at the team hotel and then determine the best course of treatment to ensure he recovers as quickly as possible."
Team Sky will now no doubt focus on stage wins: their best placed riders now Landa has withdrawn is the Irish veteran Nicolas Roche, almost seven minutes down in the overall standings.
Landa had gone into the stage in eighth position after a solid performance in Sunday's time trial. He was one minute and 18 seconds down on GC leader Gianluca Brambilla with his favourite terrain still to come.
The prolific climber won back-to-back stages in last year's Giro on his way to finishing third in the overall standings while riding in support of Astana team-mate Fabio Aru.
While Team Sky have won the Tour de France three times in the past four years, they have struggled to make an impact in the Giro d'Italia.
Bradley Wiggins made the Giro his main focus the year after winning the 2012 Tour but withdrew with a chest infection after struggling on a number of wet descents. And last year Richie Porte, now at BMC, abandoned after conceding 27 minutes in the mountainous stage 15 -- a few days after the Australian was docked time for an illegal wheel change with compatriot Simon Clarke.
Landa is the second Sky rider to leave the 99th edition of La Corsa Rosa after Italian sprinter Elia Viviani was disqualified for finishing outside the time limit in stage eight to Arezzo.
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