The 2012 winner withdrew from the Giro d’Italia on 18 May due to a debilitating chest infection and returned home for treatment and assessment of his knee.
However he has struggled to train at his normal level of intensity and will not defend his title between 29 June and 21 July.
Team Sky principal Sir Dave Brailsford said: Wiggins had "gone past the point where he can be ready" for the Tour.
"It’s a big loss but, given these circumstances, we won’t consider him for selection," Braislford said.
“He hasn’t been able to train hard since the Giro and now he needs further rest. Whilst we all know these things happen in sport, it doesn’t take away from the fact that this is a huge disappointment for everyone in the team – and above all for Brad.
”It’s incredibly sad to have the reigning champion at Team Sky but not lining up at the Tour. But he’s a champion, a formidable athlete and will come back winning as he has before."
Wiggins added it was a "huge disappointment" to miss the Tour but admitted it is a "relief" he will not have to worry about his fitness.
“I can’t train the way I need to train and I’m not going to be ready. Once you accept that, it’s almost a relief not having to worry about the injury and the race against time," the London 2012 gold medallist admitted.
“I’ve been through this before, when I broke my collarbone, so I know how it works. I’ll get this sorted, set new goals for this season and focus on those.”
Chris Froome was expected to lead Team Sky despite Wiggins' victory last year, and the Sports Personality of the Year's withdrawal effectively confirms Froome's promotion.