Casemiro is suspended after picking up a second yellow card in the group stage during his side's 5-0 thrashing of Peru on Saturday.
Fernandinho was another option for Tite, but the Manchester City midfielder is still battling a knee injury and the coach said Allan would start in Porto Alegre on Thursday.
"Fernandinho is out of the game. Allan will play," Tite told a news conference.
"If we win, if we qualify, maybe he [Fernandinho] will be ready for the next game. Fernandinho would play in his normal and natural condition. He wasn't in his condition."
Paraguay are unbeaten in their past four games against Brazil at the Copa America, with the two most recent meetings seeing them advance via penalties in quarter-finals.
Tite warned his team, who collected seven points from three games in Group A, they would need to stay focused.
"Mental characteristics have to be strong because they are decisive games," he said.
"Very high concentration level, prepare for different situations."