"I'm very disappointed I'm not able to compete in the Western & Southern Open in Cincinnati as I was really looking forward to defending my title," world number one Williams said in a statement on the tournament's website.
"My shoulder inflammation continues to be a challenge, but I am anxious to return to the court as soon as possible."
The decision by Williams comes six days after she tumbled out of the singles competition at the Rio Olympics where she suffered a shock defeat to Ukraine's Elina Svitolina.
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The withdrawal by Williams means the tournament second seed Angelique Kerber of Germany will claim the world number one ranking if she wins the event.
Williams, who will be replaced in the draw by Misaki Doi of Japan, has been the world's top-ranked player for 183 consecutive weeks.
(Reporting by Frank Pingue in Toronto; Editing by Andrew Both)
