The 50-year-old Spaniard has not played a competitive round since last year's Masters and is unable to take up his invitation to compete in the opening major championship of the season at Augusta starting on April 7.
"I'm sorry to announce I'm unable to attend this year as I am not feeling well," Olazabal said in a statement on Friday.
"The Masters is very special to me and walking up Magnolia Lane gives me a peace of mind like nowhere else.
"It's been very tough being at home these last few months doing nothing. I'm feeling better, I hit a bucket of balls every morning and spend 45 minutes on the putting green.
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"I practise for about three hours. I don't set myself goals or dates, time will tell," added the 1994 and 1999 Masters champion.
Olazabal, who has seven top-10 finishes from his 27 appearances at Augusta, triumphed in 1999 after overcoming rheumatoid polyarthritis in three joints of his right foot and two in his left.
He has 30 worldwide career victories and was captain of Europe's Ryder Cup team when they pulled off their 'Miracle of Medinah' comeback win over the United States in Illinois in 2012.
(Writing by Tony Jimenez; Editing by Ed Osmond)
