Sorenstam held a one-shot lead going into the third round but had four bogeys and one birdie to fall four shots behind leader Anja Monke of Germany.
Monke shot 68 for a 9-under 207 total, two shots ahead of Iben Tinning of Denmark (70) and Veronica Zorzi of Italy (71).
Sorenstam, a winner of 72 LPGA titles and 10 major championships, plans to retire after this tournament.
I am not giving up, Sorenstam said. I just walked off the course disappointed, but I will be ready for tomorrow. I really dont know what emotions I will have tomorrow. Its nothing that I have practiced before.
Its a day we all knew was coming and its now here within 24 hours. So, I will just embrace it and go with the emotions.
Zorzi could have tied for the lead but she was handed a two-stroke penalty for failing to replace her ball in the right spot after it moved on the 15th green.
Sorenstam made her only birdie of the day on the par-5 third hole, and then followed it up with four bogeys.
It was a tough day, she said. I really dont know what to say other than nothing really happened today. I thought I hit some good shots, but just could not get anything going. Its just golf.
Monke is chasing her second Ladies European Tour title, but said she wouldnt be too disappointed if Sorenstam manages to overtake her.
She is my idol, and an idol for every girl that touches a golf club, Monke said. If she plays well and wins tomorrow, I will be really happy for her.
Laura Davies of Britain shot 71, tied for fourth with Sophie Gustafson of Sweden.