Evans started the 204.5-km Alpine stage with the yellow jersey but his painful injury, which he suffered in a crash on Sunday, meant he struggled to finish the ninth stage and lost the overall lead to Luxembourg's Andy Schleck.
After crossing the line more than eight minutes behind stage winner Sandy Casar of France, his BMC Racing president Jim Ochowicz revealed the full extent of the world champion's injury.
"The team doctor took him to the clinic in Morzine (during Monday's rest day). They did an x-ray of his elbow. He has a fracture in his elbow," Ochowicz said.
"So we decided not to tell anybody this morning about that, and to try to fake it through the race, maybe get him to the finish line, but we didn't want our competitors to know and have them attacking him during the race.
"We controlled the race knowing that we had a problem but we weren't sure what the outcome would be. At the end the injury just overwhelmed him."
Evans, who dropped from first to 18th in the overall standings and trails Schleck by 7:47, could not hide his disappointment and broke down in tears after crossing the line.
"For the win, the Tour is over for this year," said the world champion, who added he will continue the race.
"Everyone believed in me, in this whole project, all the team has been so good to me. Everything was going so good, I'm so sorry to let them all down."
BMC Racing team director John Lelangue said the team would support Evans as he tries to win some stages along the way.
"Cadel was struggling to hold the handlebars and he went to train discreetly in the morning. But the Madeleine (climb) was too hard for him.
"We're going to go on this way. The medical advice is that he can go on without danger."
Evans was left to rue his luck for the second time in three years as he had suffered a similar crash in the Pyrenees the day he took the yellow jersey in 2008. That crash also cost him victory and he eventually finished second behind Spain's Carlos Sastre.
