Title holder Andy Murray, Roger Federer and Rafael Nadal have already pulled out of the men's event in Toronto.
Williams, 34, will defend her singles and doubles titles when the Olympic tennis event begins in Rio on 6 August.
"Of course, we are disappointed that Serena will not play in the tournament this year," said Toronto tournament director Eugenie Lapierre.
"Because this is an Olympic year, the players have very full schedules. Sometimes your body needs rest. We hope that Serena will recover quickly and wish her much success for the rest of the season."
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