The 26-year-old Spaniard, who also pulled out of this week's Toronto Masters, has not played since losing at Wimbledon in the second round on June 28.
"Hi all, another message to announce something that definitely doesn't make me happy but unfortunately I won't be competing at the tournament in Cincinnati next week," the 11-times grand slam winner posted on his Facebook page.
"I am still not ready to play."
Despite winning a record seventh French Open title this year, Nadal has fallen to third in the world rankings.
His knee condition is a worry for the Spaniard so close to the Augusr 27-September 9 U.S. Open, the year's final grand slam.