Day, who has dealt with vertigo in the past, was 3 under for the championship when he was approaching his ball in the greenside bunker on the ninth hole, his last of the second round.
Suddenly, Day fell over to his left, attempting to brace his fall with his hands. His head bounced off the hard ground and Day lay nearly motionless for several minutes.
"I was walking with him, the next thing I know, I turned around and I think he got dizzy and slipped and fell," said Jordan Spieth, his playing partner. "So at that point, how can we help him out and kind of clear the scene and try to keep the cameras off."
Day remained flat on his back while medical staff tended to him. He finally got up with their help, still a bit shaky on his feet, and chose to finish off his round.
The popular Australian climbed gingerly into the greenside bunker, where his hands were visibly shaking. Day then splashed out of the sand as the gallery cheered, two-putting for bogey to finish at 2 under, at the time three shots off the lead.
"He seemed chirpy, buoyant all day," said Day's other playing partner, Justin Rose. "That was out of the blue, for sure."
Day was helped onto a cart and driven to the scorer's tent to make his round official, then helped into a waiting van. Day is staying on the property in a large motorhome.
"Jason was diagnosed to have suffered from Benign Positional Vertigo," his agent, Bud Martin, said in a statement. "He was treated locally by Dr. Robert Stoecker and Dr. Charles Souliere and is resting comfortably. His condition is being monitored closely and he is hopeful he will be able to compete this weekend in the final rounds of the U.S. Open."
Day's caddie, Colin Swatton, said that it was similar to an episode that Day had at last year's World Golf Championship event at Firestone in Ohio. Day had completed two holes on Sunday when he had to withdraw because of dizziness.
Day, who won the Farmers Insurance Open earlier this year, went through a procedure that was supposed to help with the vertigo, but issues with his equilibrium have continued. Day was forced to withdraw from the Byron Nelson last month after getting dizzy during the pro-am.
"I know he didn't play in Dallas this year because of vertigo," said Tiger Woods, who was playing in the group just behind Day on Friday. "I played with him at the Memorial and talked to him in depth, they did a blood panel and all of that stuff. I hope he's OK."
Day is the second player to be hospitalized during the U.S. Open.
Gary Woodland was taken to Tacoma General Hospital after he shot 4-over 74 in the opening round Thursday. Woodland was treated with IV fluids and diagnosed with dehydration and a virus, but returned to the course and played his second round Friday.
Fortunately for Day, he was on the final hole when he collapsed, allowing medical staff to reach him quickly. Chambers Bay is blanketed by massive dunes and rugged terrain, and with the huge galleries it is difficult to get around.
"I was glad we could get done," Rose said. "At least he has a chance to recover for tomorrow, hopefully. I don't know if this is one of those things that is 10 minutes or a day."