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The world number two was scheduled to represent Spain in next week's tournament at Rotterdam Ahoy but has been replaced by Reilly Opelka of the United States.
Twenty-time grand slam winner Nadal has been struggling with a lower back injury and was also forced to pull out of Spain's ATP Cup ties this month.
The 34 year-old was cleared to take part in the Australian Open, where he did not drop a set before losing to Stefanos Tsitsipas in the quarter-finals.
However, Nadal has still not fully recovered from the issue and will now miss another event.
Organisers of the ATP 500 tournament confirmed the news and Nadal later took to Twitter to explain the decision.
World number three Daniil Medvedev will replace Nadal as the top seed in the Rotterdam tournament, which runs from March 1-7.