Left-armer O'Keefe, Australia's joint-highest wicket-taker along with fellow spinner Nathan Lyon during the recent test series in India, was slapped with a A$20,000 (£11,815) fine earlier this month for making "highly inappropriate comments" when drunk at an awards night in Sydney.
O'Keefe was also fined for an alcohol-fuelled incident at a Sydney nightspot in August.
Spinner Ashton Agar, who has not played a test in nearly four years or a one-day international since 2015, was instead named for his first contract along with all-rounder Hilton Cartwright and Queensland fast bowler Billy Stanlake.
Lyon and legspinner Adam Zampa are the other specialist spinners on the 20-man list named on Monday which remains "proposed" pending a new collective bargaining agreement between players and the board.
The current agreement is due to expire on June 30.
The other surprise omission was all-rounder James Faulkner, who was man-of-the-match in the 2015 World Cup final but was excluded from the one-day squad released last week for next month's Champions Trophy in England and Wales.
Top order batsman Shaun Marsh, who averaged less than 19 runs on the tour of India, has also been left out, along with veteran paceman Peter Siddle, former one-day captain George Bailey and test opener Joe Burns.
All-rounder Mitchell Marsh was retained despite his poor form in test cricket and after suffering a serious shoulder injury last month that put him in doubt for the Ashes series in the coming home summer.
(Reporting by Ian Ransom; Editing by Peter Rutherford)
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