The reigning U.S. Open champion injured her left knee injury at the WTA Finals last October and has not played since.
"It’s been a long road to recovery, and while I was looking forward to getting back on court and defending my title at Indian Wells, unfortunately, I’m still not 100%," Andreescu said in a statement.
She gave no indication of when she might return.
Kerber withdraws from Olympics due to fatigue
"While I am disappointed that I am not competing next week in a tournament where I have such great memories, I am focused on my recovery and rehab and working hard to get back on the court as soon as possible," Andreescu added.
She was the third major women's player to withdraw from the tournament in the California desert. Reigning Wimbledon champion Simona Halep and three-time Grand Slam champion Angelique Kerber, last year's finalist, both announced their withdrawals on Friday due to injuries.
Murray, Djokovic in, Williams, Federer out - who's playing tennis in Tokyo?
Wimbledon finals as they happened - Djokovic defeats Berrettini, Barty beats Pliskova