Hendry was crushed 13-5 by Mark Selby. He had led 4-2 at one point and the contest was evenly poised at 4-4 overnight, but Selby won nine of the ten frames yesterday – he rattled off the first two of the evening session to seal victory – and now plays Ronnie O'Sullivan in the quarter-finals.
After his first-round tie with 18-year-old Chinese player Zhang Anda, Hendry revealed that he was writing his retirement speech when he found himself trailing during the match. Inevitably, the Scot was asked following last night's result whether retirement was again in his thoughts.
"Right now it is. But I'm sure I'll be back next year," said the 41-year-old seven-time former champion. "It's hard to play like that, when you're used to so much success here and used to playing well here, it's hard to put in performances like that."
Selby had won all four frames before the mid-session interval yesterday morning to surge into an 8-4 lead. Breaks of 96, 46 and 44 carried the Leicester player into a 7-4 lead but it looked odds-on that Hendry would win the next frame. However, Selby fought back from 60-0 down after Hendry missed a red. Hendry was looking to find a corner pocket but the red clipped the pack to deflect off its intended path, and Selby cleared up with a break of 62.
Hendry could not bear to watch as the Masters champion made his measured break – it was the second time in the match Selby had stunned his Scottish opponent by battling his way back into a frame which looked lost, having pinched the seventh from 75-0 behind on Sunday.
Selby, moved out of sight, building up an 11-5 lead in the afternoon before closing out the match in the evening session, but he knows it will be a lot tougher when he faces O'Sullivan.
"Ronnie's not got that many weaknesses, so it's hard to pick some out if you were looking at any," said Selby. "Ronnie's expectations are so high of himself that even when he does make three centuries he's probably upset that he's not made four.
"When I watched him play earlier on, I'd have been happy with that performance."
O'Sullivan was indeed happy enough with his play in the 13-10 win over Mark Williams but the Englishman gave a downbeat assessment of his chances of adding to the titles he won in 2001, 2004 and 2008.
"For a change I managed to put a few decent frames together, to my surprise," said O'Sullivan. "Out of panic and desperation I managed to find a bit of form.
"I wouldn't say it was really flowing. There's no point me getting carried away because over the years I've thrown two or three world titles away. I know why but I can't cure it. I can't afford to let myself get confident.
"I've played too many up-and-down games over the years to even think about getting excited anymore."
Ali Carter joined O'Sullivan and Selby in the quarter-finals with a 13-11 victory over Joe Perry, showing nerves of steel after looking like throwing away a 10-6 overnight lead. Perry won five frames in a row to jump into an 11-10 lead, but 2008 runner-up Carter fired in breaks of 104 and 82 to edge ahead and then stayed composed to win frame 24 with two scoring visits.
"At 11-10 down I was looking adversity in the face but I managed to turn the tide. I didn't want to be going home," he said.
Shaun Murphy became the final player to reach the last eight, winning 13-10 against China's Ding Junhui. Murphy finished with a superb break of 128 after Ding missed a red to the middle pocket.