The Spanish world number two has been struggling with an injured left foot that he suffered at the Madrid Masters in October and the problem shows no sign of healing.
Nadal was forced to withdraw from the lucrative, season-ending Masters Cup in Shanghai in November then had to postpone his planned comeback at this week's Chennai Open in India.
The French Open champion was hoping to compete at next week's Sydney International, one of the last major warm-up tournaments before the Australian Open starts in Melbourne on January 16, but told organisers on Thursday his foot was still troubling him.
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"The tournament is very strong and it would have been exciting to play there. I hope very much I will play in Sydney next year."
Tournament director Craig Watson said: "Obviously the injury to his foot is taking longer than expected to recover.
"For Rafael, his health and fitness is the priority and we wish him the best for a speedy recovery."
It is not unusual for top players to miss the Australian Open through injuries suffered the previous season and there have been growing calls to move the tournament to a later date.
Last year's casualties included defending champion Justine Henin-Hardenne, beaten finalist Kim Clijsters and Jennifer Capriati, the 2001 and 2002 winner.
There are already several high-profile players in doubt this year including reigning men's champion Marat Safin, four-time winner Andre Agassi and former Wimbledon champion Maria Sharapova.
Safin pulled out of the Hopman Cup because of a knee injury, Sharapova withdrew from the Australian women's hardcourt championships with a shoulder problem and Agassi is battling a long-term ankle injury.
Players have been demanding the first grand slam of the year, which is traditionally held in the last two weeks of January, be moved back to March when the weather is cooler and also to give them a longer break.
For example, the 2003 women's final had to be played indoors when the temperature rose to 43.9 degress Celsius.
Tennis Australia officials did agree to push the 2007 tournament back one week but later scrapped the plan and reverted to the original dates.
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