Obree, whose Olympic medal hopes in Atlanta were also ruined by ill-health, has been unwell since late May with a viral infection. The Scot, who won the pursuit title for the second time last year, was told by specialists not to ride following a day of tests.
Now Obree hopes he can recover in time to race in the world time-trial championship in Lugano in October.
Obree's personal manager, Frank Quinn, said the cyclist had been worried about his fitness for some time and feared he would not be able to do himself justice in competition. "Graeme told me that he felt his form was insufficient, and the specialist told him that his muscle power was not good enough for such a challenge," he said.
Doug Dailey, the national coach, said Obree cannot be replaced in the world championship team. "He earned his place as the defending champion. Now it is down to Chris Boardman to go for the gold," he said.
Miguel Indurain, five times winner of the Tour de France and the Olympic gold medallist, will participate in next month's Tour of Spain for the first time in five years.
"It was a team decision," the 32-year-old Banesto rider said. "I didn't especially want to race, but it's the team that decides. I always feel like racing and winning, though, especially in such a big race."
The Spaniard has not raced in the Tour of Spain since 1991, when he came second behind his compatriot Malchor Mauri, preferring to gear his training toward winning the Tour de France in July. His five-year reign over the Tour ended this year when he finished 14min 14sec behind the winner, Bjarne Riis of Denmark.
The Tour of Spain, which runs from 7 to 21 September, and winds its way through 3,898 kilometres (1,772 miles) of Spanish countryside, finishes in Madrid.Reuse content