The unexpected contraction, down from 9.4 per cent growth in the preceding quarter, was largely due to an output drop in the biomedical manufacturing industry, the trade ministry said in a statement.
Compared to a year ago, gross domestic product (GDP) grew 1.9 per cent, still within the government forecast of 1.0-3.0 per cent expansion for the whole year and better than the first-quarter growth rate of 1.4 per cent on the year.
Singapore's economy is seen as a bellwether for Asia due to its sensitivity to demand from key markets like Europe and the United States.
"The figures will disappoint as most traders were expecting modest expansion," said Justin Harper, market strategist for IG Markets Singapore.
"Up until now the Singapore economy has been pretty resilient, weathering the storm coming in from the eurozone by diversifying across a range of sectors including oil and gas, pharmaceuticals and electronics," he said.
"But the headwinds are proving too strong as Asia takes a hit from slowing European trade."
The GDP estimate for the second quarter is computed largely from data in April and May and subject to revision.
The median forecast of a Dow Jones Newswires poll of 11 economists had tipped Singapore's second-quarter GDP to expand 0.8 per cent from the previous three months.
The manufacturing sector contracted 6.0 per cent in April-June from 20.9 per cent growth in the previous quarter, while the construction industry grew a modest 0.3 per cent from 27.9 per cent in the same time period.
The services sector grew 0.4 per cent in the three months to June, compared with 2.7 per cent growth in the first three months of 2012.
Global demand weakness for Singapore's key exports -- electronics and pharmaceuticals -- was the primary factor dragging down second-quarter growth, DBS Group Research said in a report.
"The simultaneous surges in electronics and pharmaceutical productions that drove GDP growth in the first quarter are not sustainable amid the global demand weakness," the banking group said.
"Europe remains the biggest risk and a fading growth momentum in the US is certainly not helpful," the report said.
The 27-nation European Union (EU) was Singapore's second-largest trading partner in 2011, with bilateral trade totalling 65 billion euros ($79.3 billion).
Exports to the EU totalled Sg$48.1 billion last year, while imports from the EU reached Sg$57.9 billion, official data showed.
In the United States, persistent fears that the world's biggest economy would not be able to boost growth despite massive efforts from the government and central bank continue to put a dampener on global markets.
Singapore's stock exchange was hardly affected by the GDP slump, gaining less than half a percentage point in morning trade.
Singapore's GDP grew 4.9 per cent last year, down from an exceptional post-recession expansion of 14.8 per cent in 2010.