The 1995 Roland Garros champion and former number one who ruled the clay surface in the 1990s and was known for his ironman training regime, was unable to work a miracle at the Stadthalle against Thiem as he went down 6-2, 6-3.
Muster bade farewell by throwing his racquet and towels into an appreciative crowd of home fans, who had entered and would exit to a standing ovation. The one-time toughest man in tennis at times looked overcome with the scene.
"I never had a chance to say goodbye," said Muster to the crowd. "This is such a great goodbye. This is definitely my last appearance on the ATP."
"It was my last match, it was very exciting to end it in Vienna and very emotional. It was such a send off.
"I didn't know whether to cry or play," he added.
Muster, who showed his iron will by fighting back after severing left knee ligaments when a drunk driver crashed into him in 1989 after he reached the International Players Championship final in Key Biscayne where he was to face Ivan Lendl, said he did not feel he had over extended his welcome.
"My last match was very exciting, I had a great year-and-a-half on the tour, it was great to test myself to get out and practise every day with the guys.
"I enjoyed my (last) year-and-a-half on the tour every much. I loved going out there every week, feeling myself getting better. I saw how much I really enjoyed tennis.
"I challenged myself and got respect from the guys (other players) and I really appreciated it.
"Today was a great way to say goodbye. I got a lot of respect from the fans. I want to thank everyone who supported me over the years."
Muster's defeat in 61 minutes concludes a career which began in Vienna in 1984 as a 17-year-old. Muster reached the final in 1988, 1993 and 1995 but was never able to lift the trophy.
He was the oldest player to compete on the circuit since 43-year-old Jimmy Connors at Atlanta in 1996 but defeat frustrated Muster's hopes of becoming the first player over 40 to win a match since 45-year-old Ken Rosewall at Wimbledon 31 years ago.
The Austrian never officially retired, but merely stopped playing for 11 years. He then made a return in September, 2010, playing lower-level Challengers, winning just two of 25 matches over 14 months.
He had wanted to bid farewell in Vienna.
Earlier German veteran Tommy Haas continued his comeback after hip surgery with an upset of fifth seed Juan Ignacio Chela 6-7 (3/7), 6-3, 7-6 (7/5) to reach the second round.
Haas, who won this event a decade ago, needed four match points to get past Chela.
Italian eighth seed Fabio Fognini advanced as Spain's Tommy Robredo quit injured, 7-6 (9/7), 5-7, 2-1. Slovenian Ajaz Bedene got through when Ivo Karlovic retired after the first set with back pain, handing over a 7-6 (7/0) win.
German Daniel Brands beat Austrian Martin Fischer 6-7 (3/7), 6-2, 7-6 (8/6) while another German Philipp Petzschner put out Spain's Pablo Andujar 6-2, 6-2.
Xavier Malisse put out Spain's Albert Ramos 6-1, 6-4 and Guillermo Garcia-Lopez defeated American James Blake 6-2, 5-7, 6-4.
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