The Serbian won a record seventh title at the season-ending event last year, defeating Yannick Siner in the final and will miss out for just the second time since making his debut in 2007.
Djokovic’s only previous absence came in 2017 after he cut his season short with an elbow injury.
He last appeared on court at the lucrative Six Kings Slam in Saudi Arabia last month, where he lost to Sinner before beating Rafael Nadal.
Djokovic subsequently pulled out of the Paris Masters last week and, writing on Instagram, he said: “It’s a great honor to qualify for the @nittoatpfinals in Turin.
“I was looking forward to being there but due to an ongoing injury I won’t be playing next week. Apologies to those who planned to see me. I wish all players a great tournament. See you soon!”
Djokovic’s withdrawal means he ends his season having won just one title – the long-awaited Olympic gold medal in Paris – while playing just 11 tournaments.
He admitted that seeing great rivals Nadal and Andy Murray follow Roger Federer into retirement has been difficult, but insisted he is still motivated to continue chasing the biggest titles.
The 37-year-old will be outside the top four for the Australian Open in January, currently ranked sixth, but is likely to drop further.
Djokovic’s withdrawal means Casper Ruud, Alex De Minaur and Andrei Rublev will join Sinner, Carlos Alcaraz, Alexander Zverev, Daniil Medvedev and Taylor Fritz in Italy for the tournament, which starts on Sunday.