The 24-time Grand Slam champion, 37, will not be taking part in the season-ending event in Turin as he continues to struggle with an "ongoing" injury problem.
Djokovic said in an Instagram story: "I was really looking forward to being there, but due to ongoing injury, I won’t be playing next week.
"Apologies to those who were planning to see me. Wishing all the players a great tournament.
"See you soon."
Djokovic had previously cast doubt on his participation at the event as he explained that he has tailored his schedule to give himself the best possible chance to compete in Grand Slams and events where he gets to represent his country.
He said in September: "Torino is not my goal at all, to be honest, I am not chasing ATP Finals, I am not chasing the rankings, etc.
"As far as I am concerned, I am done with those tournaments for my career.
"Whether I will play other tournaments this year or in the future, I can’t say right now.
"My main priorities are playing for the national team and Slams, everything else is less important."
Djokovic explained that he is more "spontaneous" with his event selection as he is now in the closing years of his career.
The world number five said: "Usually in my career I used to have my schedule ready six months in advance, but nowadays that’s not the case, now it’s more spontaneous.
"Firstly, I need to physically, emotionally and mentally rest in order to even start thinking what I want to do next, in what way, how much and where."