The big-serving 27-year-old American, top seed in Sydney, said after Wednesday's 6-4 6-4 loss to Harrison that he was contemplating pulling out of the year's first grand slam because the injury, a bone bruise, needed rest.
"I am extremely disappointed to announce that I have to withdraw from the #AusOpen," the world number 13 said on the Australian Open Twitter feed.
"I have been feeling some discomfort in my knee and have recently learned that I have a bone bruise.
"Doctors have told me that continuing to play on the knee could result in a more serious injury."
Isner's withdrawal leaves the United States with Sam Querry as their only representative among the 32 seeds in the men's draw for the tournament, which starts on Monday.