The four-time Grand Slam singles champion will now prepare to represent Japan at her second Olympic Games on July 26.
The Japanese superstar, playing at the All England Club for the first time since 2019, went down 6-4, 6-1 in her second-round match on Centre Court in less than an hour on Wednesday.
The players were locked at 3-3 in the first set before the four-time Grand Slam champion lost her way.
Osaka admitted she had been short of confidence.
“Honestly, I feel like even though in the beginning it was kind of like we were trading games, I don’t know why, I didn’t feel fully confident in myself,” she said.
“I didn’t feel like I was playing that well. I guess, like, those doubts started trickling in a lot into my game. Obviously, the second set wasn’t that great.”
Navarro, 17th in the world rankings, broke to love in the seventh game and went on to take the first set.
She tightened the screw in the second set, breaking twice to race into a 4-0 lead and repeated the feat to seal the match.
Osaka’s win over Diane Parry in the opening round on Monday was her first at Wimbledon since 2018.
Now she is ranked at 113 having returned to the tour only in January after giving birth to daughter Shai, now one-year-old.
Osaka said she was not sure what her schedule would look like but said the Olympics in Paris, starting later this month, would be a priority.
She reached the third round of the Tokyo Games, held in 2021.
The tennis tournament in Paris is taking place on the clay courts of Roland Garros, where Osaka held a match point against eventual champion and world number one Iga Swiatek at the recent French Open.
“Since I’m out so early, I really want to take the time and train for the Olympics because I do want to do well,” she said.
“I do know that my last clay court match was really good. So I might end up liking that surface a lot more than grass now.
“As far as the schedule, I don’t really know too much yet. I think I’m just going to go home and, I guess, see what Shai is doing and then plan from there.”