The Belgian ran wide at a medium-speed right hander in stage 11 (10.13km) and clipped a rock with the rear of his I20 N, which sent the car off the road and into the trees lining the road.
Neuville and co-driver Martijn Wydaeghe emerged from the incident unscathed but the damage to the car was too severe to continue.
Neuville had started the day with a 5.7-second lead over Toyota’s Elfyn Evans, which he extended to 10.8s prior to stage 11, the only brand new test at this year’s event.
The Hyundai driver wasn’t the only driver to hit trouble in the stage as WRC2 runner Oliver Solberg was lucky to recover from a huge spin behind the wheel of his Toksport Skoda Fabia.
Neuville’s accident has handed the rally lead to Evans, who now enjoys a 19.1s advantage over M-Sport’s Ott Tanak.
The sole remaining Hyundai driven Esapekka Lappi has inherited third, while M-Sport’s Pierre-Louis Loubet has jumped to fourth ahead of Toyota’s Takamoto Katsuta.
Thierry Neuville, Hyundai World Rally Team
Photo by: McKlein / Motorsport Images
Eight-time world champion Sebastien Ogier occupied sixth despite receiving a one minute penalty for a safety belt infringement, which occurred after he was forced to change a wheel during stage 2 on Friday.
World champion Kalle Rovanpera is the last of the Rally1 runners in seventh, 2.6s behind Ogier.
Rovanpera’s rally hopes were severely dented on Friday when he also suffered a flat tyre after hitting the same pot hole that Ogier struck in stage 2. He lost more than two minutes in the process.
The Finn however has started Saturday on the front foot by winning the opening three stages of the morning loop to close in on Ogier.
Ogier and Rovanpera are the only Toyota drivers registered to score manufacturer points this weekend in a move of solidarity with Hyundai, following the Korean marque’s decision to field only two cars following the death of its third driver Craig Breen.
Crews will face five more stages to complete Saturday’s action.