He is the first reigning Wimbledon men's champion to not defend the title since Goran Ivanisevic in 2002 and only the second in the last 35 years. The grass-court Grand Slam tournament begins Monday.
"I'm just not 100 percent," the No. 1-ranked Nadal said during a news conference at the All England Club. "I'm better than I was a couple of weeks ago, but I just don't feel ready."
His announcement came about 2½ hours after he lost to Stanislas Wawrinka in an exhibition match on grass at the Hurlingham Club in south London.
"Today was the last test," Nadal said. "I didn't feel terrible but not close to my best."
He also lost an exhibition there Thursday against 2002 Wimbledon champion Lleyton Hewitt and, coincidentally, Friday's draw for this year's tournament set those two up for a second-round meeting.
Nadal looked ragged during his straight-set loss against Hewitt on Thursday. But the Spaniard appeared in better condition against Wawrinka, several times racing toward the net for sharp volleys or scurrying along the baseline for winning groundstrokes on the run.
Still, Nadal said he just did not sense that he could win Wimbledon and so he did not want to compete at all.
"When I start a tournament like Wimbledon, it is to try to win, and my feeling right now is I'm not ready to play to win," the six-time major champion said.
Nadal has complained about his knees since a fourth-round loss to Robin Soderling at the French Open on May 31 ended his streak of four consecutive championships at Roland Garros. Later that week, Nadal pulled out of the Wimbledon tuneup tournament at Queen's Club, then went to Barcelona to have tests on his knees.
"I think I reached the limit right now. I need to reset to come back stronger," Nadal said.
Asked what sort of threat the knee problems might present to his career moving forward, he said: "It's not chronic. I can recover, for sure."
But aside from the physical issues, Nadal spoke Friday about the mental toll the injury has taken. This is, after all, a player whose rise to the upper echelon of tennis was built in part on his ability to race around a court and track down shots.
"One of the big problems is, when I am playing, I'm thinking more about the knees than about the game. So that's very difficult to play well like this, no?" he said.
The withdrawal opens the door for Roger Federer to reclaim the No. 1 ranking, a spot he held for a record 237 consecutive weeks until Nadal pushed him down to No. 2 in August. That happened about a month after Nadal beat Federer in the 2008 Wimbledon final, a taut thriller decided by a 9-7 fifth set in fading light.
Nadal prevented Federer from claiming a sixth consecutive championship at the All England Club. Now Federer who beat Nadal in the 2006 and 2007 Wimbledon finals doesn't have to worry about his nemesis standing in his way this year.
Federer, who is 7-13 against Nadal, also avoided facing him at the French Open. Instead of a fourth consecutive final in Paris against Nadal, Federer faced Soderling for the championship June 7 and won in straight sets to complete a career Grand Slam and tie Pete Sampras' record of 14 major titles.
Federer's agent, Tony Godsick, said the Swiss star would wait to comment on Nadal's withdrawal until a pre-tournament news conference Saturday.