Edmund was locked at 4-4 in the final set, having battled back from losing the first 6-3 to win the second in a tie-break.
But the British No 2 yelped in pain after more than two hours of tennis in Brisbane when he appeared to roll over on his right ankle.
Opponent Dimitrov immediately sprinted over to his stricken opponent, vaulting the net before helping Edmund limp to his chair for treatment.
The 22-year-old took a medical timeout and his physio heavily strapped his right ankle as the player told him he had “heard a crack” before hitting the deck.
However, he appeared to recover well from the incident, showing no real ill-effects on court despite the initially worrisome cry.
But he was unable to overcome the Brisbane International No 1 seed, who brought up two match points a few minutes later and converted to seal a 6-3, 6-7, 6-4 victory.
The Bulgarian will now face Australia’s Nick Kyrgios for a place in the final.
Edmund meanwhile will hope that his ankle is not severely damaged just 10 days before the first Grand Slam of the season, the Australian Open.
British hopes have already taken two major blows with Andy Murray withdrawing from tournament altogether and Jo Konta under an injury cloud after retiring from the women’s singles in Brisbane.