Schumacher, a seven-time F1 world champion, had agreed to help out former team Ferrari and step in for Felipe Massa on a temporary basis after the Brazilian suffered head injuries at the Hungarian Grand Prix last month.
But the German has now abandoned the comeback after failing to shrug off an injury suffered in a motorbike accident in February.
A statement on Schumacher’s official website read: "Yesterday evening, I had to inform Ferrari President Luca di Montezemolo and Team Principal Stefano Domenicali that unfortunately I’m not able to step in for Felipe.
"I really tried everything to make that temporary comeback possible, however, much to my regret it didn’t work out.
"Unfortunately we did not manage to get a grip on the pain in the neck which occurred after the private F1-day in Mugello, even if medically or therapeutically we tried everything possible."
"The consequences of the injuries caused by the bike-accident in February, fractures in the area of head and neck, unfortunately have turned out to be still too severe.
"That is why my neck cannot stand the extreme stresses caused by Formula 1 yet.
"This are the clear results of the examinations we did on the course of the past two weeks and the final examination yesterday afternoon.
"As there were no improvements after the day in Mugello, I decided at short notice on Sunday to do that thorough examination yesterday.
"I am disappointed to the core. I am awfully sorry for the guys of Ferrari and for all the fans which crossed fingers for me.
"I can only repeat that I tried everything that was within my power. All I can do now is to keep my fingers crossed for the whole team for the coming races."
Since confirming he was to make an F1 return, Schumacher has been pushing himself hard to get back to race fitness.
The 40-year-old had been expected to drive for Ferrari at the European Grand Prix at Valencia on Aug 23.
Ferrari have reacted quickly to the news Schumacher will not race at the European Grand Prix by naming test driver Luca Badoer as his replacement.