Guay, the reigning super-G world champion, has been battling back pain the entire World Cup season and ruled himself out just two days after being selected for the Canadian Olympic team.
"It was an incredibly difficult decision to stay home from the Olympics," Guay said in a statement.
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"Despite everything we did, I do not feel I can attend the Games and be at a competitive performance level that I would proud representing Canada with.
"I will be cheering on all of Team Canada from home, especially my team mates at Alpine Canada."
Erik Guay of Canada competes during the Audi FIS Alpine Ski World Cup Finals Women's and Men's Downhill on March 15, 2017 in Aspen.
Image credit: Eurosport
The leader of Canada's alpine teams that have become known as the Canadian Cowboys, Guay has reached the World Cup podium 25 times and has three world championship medals including downhill gold in 2011 and the super-G in 2017.
He also has a world downhill silver from last year's championships in St Moritz.
"It's definitely disappointing to have Erik miss out on the Olympics and we know this was a difficult decision for him to make," said Martin Rufener, Athletic Director, Alpine Canada. "He would certainly have been a medal contender if he was healthy.
"Despite Erik missing out, I'm very proud of the contingent of athletes we are sending to the Games and I know we will make Canada proud."