Vonn, 41, whose battle to reach the start line despite her knee injury dominated the opening days of the Milano Cortina Olympics, saw her unlikely bid end in agony.
She appeared to clip the fourth gate with her shoulder and lost control, barrelling off the course at high speed before coming to rest in a crumpled heap.
Vonn could be heard screaming on television coverage as fans and teammates gasped in horror before a shocked hush fell on the finish area at the bottom of the Olimpia delle Tofane course.
She was surrounded by several medics and officials before a yellow helicopter arrived, and she was winched off the course in an orange stretcher.
The helicopter took Vonn to Cortina's Codivilla Putti Hospital for a medical assessment.
Teammate Breezy Johnson, the world champion who had set the fastest time, covered her eyes and looked away as the helicopter was called.
As it took off towards Cortina, spectators applauded.
Vonn, the 2010 downhill champion, had been hoping to become the oldest Alpine skiing Olympic medallist after winning two World Cup races this year.
Skiiers left shocked
The American's crash sent shockwaves across day two of the Games.
Vonn's teammate, American downhill skier Bryce Bennett, watching in the town square in Bormio, was left shocked.
"It's obviously a bummer. It's just like the risk of downhill is high and ... Like, everyone makes it look so easy when it's going smooth and then you see how quickly it can go in the other direction.
"Her right leg didn't look so good, but we'll see."
There was still no word on Vonn's condition.
FIS president Johan Eliasch gave his thoughts on the crash.
"Tragic, but it's ski racing, right? And I can only say, thank you for what she has done for our sport because this race has been the talk of the Games and it's put our sport in the best possible light. I hope she will have a speedy recovery, and is back on skis very, very soon.
"A lot of people are going to say she shouldn't have been racing today with that type of injury."