The Hopman Cup's Twitter feed confirmed Williams had pulled out of the tournament, after the American had to cut short her first match of 2016 because of an inflamed left knee, leaving the court a set and 2-1 down against Australia's Jarmila Wolfe.
Earlier in the week the injury had also ensured Williams had been unable to play
her opening match at the traditional team warmup tournament ahead of the new season's first grand slam.
"I just have some inflammation that's been going away very slowly. It is going away but it needs a little more time," Williams told reporters at the Perth event.
"Usually I'm super-fast and I wasn't moving the way I like to move. Mainly I was afraid to move.
"I've been training really hard in the off season and pushing myself beyond the limits so a little rest, a little treatment, a day or two off will make a world of difference.
"It's not even a bump -- just a really minor thing in the road and I'll fly over it."
The 34-year-old is coming off a brilliant 2015 season in which she won the Australian Open, French Open and Wimbledon -- taking her tally to 21 grand slam singles titles -- before a surprise defeat in the U.S. Open semifinals.
"The whole year was great," Williams reflected. "But it was also physically very, very difficult. I'm looking forward to this year and making the best of it."
Asked whether she had decided whether to play at the Australian Open, which begins in Melbourne on January 18, Williams added: "I'm just taking it a day at a time still. I'm not making any decisions now."
Williams' injury has added to concerns over the fitness of a cluster of stars in the women's side of the draw at the Australian Open.
Last year's runner-up Maria Sharapova withdrew from the Brisbane International, where she was the defending champion, because of an arm injury.
"I hurt my forearm in practice a couple of days ago and need to withdraw as a precaution," the fourth-ranked Russian told reporters.
Soon after, world No. 2 Simona Halep also scratched her name from the contenders' list in Brisbane, citing a left leg problem.
In the men's half of the Brisbane draw, world No. 3 Roger Federer opens his title defense Thursday against German qualifier Tobias Kamke.
"People like to talk about this tournament as a preparation for bigger things, but I don't really see it that way," Federer told reporters. "Every tournament I play is important to me. This is a tournament I want to win."
Federer is the top seed in the men's draw, with world No. 2 Andy Murray on duty for Great Britain in the Hopman Cup and No. 1 Novak Djokovic competing in the Qatar Open in Doha alongside 2009 Australian Open winner Rafael Nadal.