A tense, evenly balanced struggle became a mismatch on Kasparov's 32nd turn when an all-too-human error by the world's number-one chess player allowed the computer to penetrate his defences and launch a relentless attack.
"I just blundered," Kasparov, 40, who had far less time left than the computer, said.
Kasparov, who played with the black pieces, resigned after white's 39th move and three hours and 40 minutes play.
X3D Fritz, a combination of German-built Fritz software and New York-based X3D Technologies' virtual reality software, plays as well as a solid grandmaster, according to chess experts.
It leads Kasparov by 1-1/2 points to a 1/2.
The first game between Kasparov and the computer was drawn. The third is to be played on Sunday and the final game is on Tuesday.
The winner stands to collect $250,000.
Kasparov lost his world championship title to Vladimir Kramnik of Russian in 2000, but is still ranked the number one player by the International Chess Federation.