Wehrlein, who is racing for Sauber this year but is a member of the Mercedes young driver programme, crashed during an exhibition event in Miami, damaging his neck.
The German missed the first week of testing but raced in the first two practice sessions in Melbourne.
However, he confirmed today that he would not be taking any further part in the weekend.
Antonio Giovinazzi will replace Pascal Wehrlein for Sauber at the Australian Grand Prix
“My fitness level is not as it should be for a full race distance because of my training deficit," Wehrlein said.
"I explained the situation to the team yesterday evening.
"Therefore, the Sauber F1 Team has decided not to take any risks.
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"It is a pity, but the best decision for the team.”
“We have great respect of Pascal’s openness and professionalism," said team principal Monisha Kaltenborn.
"This decision was definitely not an easy one for him, it underlines his qualities as a team player.
Pascal Wehrlein has been testing and practicing for Sauber but will miss the race
"The focus is now on his fitness level, and in such a situation we do not take any unnecessary risks.
"Pascal will be in China as planned.”
Giovinazzi is Ferrari's reserve driver but is 'on loan' at Sauber as part of their partnership which also sees the Swiss team use the Italian engines.
The 23-year-old comes with plenty of racing pedigree, having finished second in GP2 last year and second in Formula 3 the year before.
However, he is still very inexperienced in an F1 car and is unlikely to be challenging anywhere near the front of the grid.