The 22-year-old from Thornhill, Ont., lost in the first round to Germany's Philipp Kohlschreiber 7-6 (2), 6-4 on Monday at the Foro Italico.
Raonic, the No. 14 seed, played a close first set with no break opportunities, but the No. 22 Kohlschreiber pulled out the one-set lead thanks to a strong tiebreak performance.
Raonic saved two break points early in the second set — at the 1-1 mark — but later fell behind to Kohlschreiber, who used an effective serve to limit Raonic's break chances.
The match was completed in one hour 17 minutes.
It was the second straight early round exit for Raonic. He was ousted in the second round at the Madrid Open Fernando Verdasco.
Raonic's next tournament will be the French Open, which begins May 26.
Toronto's Daniel Nestor is still in contention in Rome. He has a first-round bye in the doubles draw alongside Swedish partner Robert Lindstedt.