Nashville - playing their first season in MLS - had been unable to train ahead of their scheduled opener against Chicago Fire at ESPN's Wide World of Sports Complex.
MLS made the decision to remove the team "in the best interest of the health of all players and staff participating in the tournament", according to a statement.
Updated groups below. ⬇️ pic.twitter.com/fBGPecEWhO— Major League Soccer (@MLS) July 9, 2020
Nashville CEO Ian Ayre, formerly of Liverpool, said: "In what has been a challenging year, and in an uncharted environment created by the tornado that devastated our city and COVID-19, this is another big disappointing outcome for Nashville SC and its supporters."
FC Dallas have already been taken out of the tournament due to positive COVID-19 tests for 10 players and one coach, while other stars - including reigning MVP Carlos Vela - have opted against traveling to Florida.
The tournament, which will form part of a 2020 regular season that was suspended in March due to the pandemic, is going ahead despite the continued rise of confirmed cases in the United States, with the national tally surpassing three million.
MLS announced Chicago have been moved from Group A to Group B following Nashville's withdrawal and will face Seattle Sounders, San Jose Earthquakes and Vancouver Whitecaps.
Orlando City lead Group A after beating state rivals Inter Miami 2-1 in the tournament's first match on Wednesday, while Philadelphia Union picked up three points against New York City on Thursday.