Dance With Fate was galloping at Del Mar in California early Thursday morning when he bolted to the outside fence near the far turn, crashed into the fence and fell.
The colt, which finished sixth in the Kentucky Derby, suffered a severe leg injury.
A veterinarian said Dance With Fate ruptured two of the three large patella ligaments in his right rear leg.
The injury was reportedly complicated by a possible infection.
The exercise rider, Joe Durant, was dumped from the horse and went to the hospital with unknown injuries.
Dance With Fate put down about six hours after the accident.