The Spaniard pulled his car into the nearest pit stop as smoke rose out from the engine.
He managed to escape unhurt before the crew came to put out the fire.
It capped off a frustrating few days for Sainz who previously bemoaned his qualifying performance.
NIGHTMARE: Carlos Sainz was forced to retire just 10 laps in (Pic: SKY SPORTS )
“I had unbelievable bad luck out there today”Carlos Sainz
The race had been Carlos’s first for McLaren, having been signed up for the 2019 to replace Fernando Alonso.
He had been on loan at Renault from Red Bull last season.
Ahead of the Australian GP Carlos Sainz admitted he was disappointed with his qualifying performance.
FIRST FACE: Carlos was driving in his first GP for McLaren (Pic: GETTY)
DISSAPOINTED: Sainz bemoaned his poor qualifying performance ahead of the GP (Pic: GETTY)
The Spaniard said: “I had unbelievable bad luck out there today.
“I was on a very good lap that would have got us into the top 10. Then I came across the Williams of Robert Kubica with a puncture in the last sector in the middle of the track at Turn 14, but I couldn’t avoid him and I dropped four tenths.
“It is what it is – I was in the wrong place at the wrong time – so it’s a shame.”