Scotland’s 26th seed hit the bottom of the table three times before raising his hand in apology to the Alexandra Palace crowd as he left the stage.
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Menzies, 36, was photographed with blood coming from a cut on his right hand.
He had led 1-0 and 2-1 in sets before English debutant Manby, 20, fought back to claim victory with his seventh dart of the match.
In a statement issued after the match, Menzies said: “Firstly, I would like to apologize for what happened. I am sorry for reacting the way I did.
“It’s not an excuse, but I’ve had a lot on my mind lately and I guess it all became too much in the end.
“It hasn’t been an easy time for me since my uncle Gary passed away recently. I saw him four days before he died and he looked at me which told me how much he thought of me.
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“If I had won the game against Charlie, my second game would have been the day of Gary’s funeral and that hasn’t escaped me.
“Let me say it again, that’s no excuse for what I did on stage. It was the wrong thing to do and I don’t want that to take anything away from Charlie. He played well.
“That’s not how I would like people to see me. Yes, I can get emotional sometimes, but not like that and that wasn’t right.”
It is the second year in a row that Menzies has been knocked out in the first round after breaking down in tears during and after his exit from Leonard Gates last December.
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Menzies later revealed that his father, Ricky, was ill in hospital at the time.
Menzies raised his hand in apology to the crowd as he left the stage (Getty Images)
Players may be sanctioned under Darts Regulatory Authority rules for aggressive, disruptive or abusive behaviour.
Former Premier League champion Glen Durrant, commentating on the after-match for Sky Sports, said: “Charlie Manby is a superstar in the making. Sometimes you can develop a player at 20. We thought it was going to be the game of the afternoon and he delivered.
“But it wasn’t the ending we all want to see. For Cameron Menzies, I think he’ll regret it for the rest of his life. It wasn’t a good show.”
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Co-commentator Stuart Pyke added: “I agree, (it was) an extraordinary reaction, but we saw him walk off stage and he raised his hand in apology. It was spontaneous.”
Former champion Wright passes safely
Also in Monday’s afternoon session, two-time champion Peter Wright advanced to the second round with a straight sets victory over Noa-Lynn van Leuven.
The 55-year-old Scot, dressed in a festive-themed outfit, checked out 152 in the first set and reached a decider in the second, before comfortably closing out victory in the third.
Wright, who will face Germany’s Arno Merk in the second round, told Sky Sports: “I know I didn’t play well, but I will in the next round. You have to grow in the tournament.”
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Wright, winner in 2020 and 2022, has struggled for form in recent times and has fallen to 30th in the PDC world rankings as a result.
He reached the quarter-finals last year, ending Luke Humphries’ title defense on his way to the quarter-finals before losing to Stephen Bunting.
Peter Wright hit nine of his 16 doubles attempts during his first-round win (PA Media)
Van Leuven, who became the first transgender player to appear at the PDC World Championship last year, was one of five players from the Women’s Series to qualify for the event at Alexandra Palace.
Beau Greaves topped the series and will face Daryl Gurney first on Friday as she seeks to become the second player to win a match in the tournament, after fellow qualifier Fallon Sherrock, who won twice in the event in December 2019.
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Three series spots were on offer, along with a spot for the winner of the Women’s Matchplay, a title taken by Lisa Ashton, who lost to 2023 world champion Michael Smith in the first round on Thursday.
With Greaves qualifying in her own right as runner-up on the Development Tour, it meant that Sherrock, runner-up in the Women’s Series, Van Leuven in fourth and Gemma Hayter, who finished fifth, joined third-placed Ashton.
Ireland’s Brendan Dolan scored 170 to seal the second set in his 3-1 victory over England’s Tavis Dudeney, while Austria’s Mensur Suljovic beat Canada’s David Cameron by the same score.
Results and schedule for Monday.
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Brendan Dolan 3-1 Tavis Dudeney
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Cameron Menzies 2-3 Charlie Manby
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Mensur Suljovic 3-1 David Cameron
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Peter Wright 3-0 Noa-Lynn van Leuven
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From 19:00 GMT
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Martin Lukeman vs. Max Hopp
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Dirk van Duijvenbode vs. Andy Baetens
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Jonny Clayton vs. Adam Lipscombe
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Connor Scutt vs. Simon Whitlock