14-year-old gelding Jet Set, ridden by Swiss competitor Robin Godel, was taken off the course and euthanised at an onsite veterinary clinic after an irreparable ligament rupture midway through the event.
22-year-old Godel, coached by New Zealand's Andrew Nicholson, was competing at his first Olympics and was sitting well back in 47th after the dressage stage.
Nicholson was the former owner of Jet Set and the duo claimed victory in the three-star Bramham event in 2016.
"The horse received immediate veterinary attention at the fence and, after an initial assessment, was transferred by horse ambulance to the onsite Veterinary Clinic," the equestrian federation FEI said in a statement.
"Sadly, ultrasound scans revealed an irreparable ligament rupture in the lower right limb, just above the hoof, and on humane grounds and with the agreement of the owners and athlete, the decision was taken to put the horse to sleep."
Godel said in an Instagram post that Jet Set "passed while doing what he loved most: galloping and jumping obstacles."
Julia Krajewski of Germany went onto win the individual eventing gold, earning her first individual Olympic medal. She also won silver in the team event with Germany in 2016.
Britain's Tom McEwen earned the individual silver and Australia's Andrew Hoy took the bronze.
Britain meanwhile won its record fourth Olympic gold medal in team eventing at Tokyo's Equestrian Park. The Aussies narrowly edged France for second — the French had a final score of 101.50 with New Zealand finishing in fifth.