Garry Houston, who was one stroke clear of Garcia heading to the final hole, parred the last to end alone in second place at 10-under-par 203.
Defending champion Luke Donald climbed back into the mix with a 5-under 66. He shares third place with Anders Hansen (67) at 9-under-par 204.
Garcia struggled throughout his round despite opening with a birdie on the first. He double bogeyed the par-4 fourth, but got that shot back with a birdie on No. 6.
The Spaniard tripped to a bogey on the seventh. Garcia atoned for that error with a birdie at 10 at Crans-sur-Sierre.
Garcia dropped another stroke at 14 to fall to minus-10. He came back to birdie the 15th, but more trouble was on the horizon.
The 25-year-old pulled his tee shot left of the fairway at 17 and was under a tree. He pitched out to the fairway, then knocked his third onto the putting surface. Garcia, however, three-putted for double bogey to fall out of the lead at minus-9.
Garcia was left with just a wedge for his second shot to the 18th. He hit it a few feet past the hole, but the ball spun back and fell into the cup for eagle.
Houston played his opening nine at even-par with a birdie and a bogey. He climbed to 10 under and within one of Garcia with birdies on 10 and 12.
The Welshman gave a stroke back with a bogey on 13, but two-putted for birdie from the front fringe at the par-5 15th. That got him back to 10 under and he remained there as he parred out.
Oliver Wilson and Paul Casey posted matching rounds of 4-under 67 to move into a tie for fifth place. They were joined at 7-under-par 206 by Leif Westerberg, Martin Erlandsson, Darren Fichardt and Pierre Fulke.
United States Amateur champion Edoardo Molinari posted a 4-under 67. He shares 28th place with seven other golfers at minus-3.
This event is serving as the first tournament for European players to earn points as they attempt to qualify for the 2006 European Ryder Cup team.