Azarenka, who triumphed in Melbourne in 2012 and 2013, had previously missed numerous tournaments due to an ongoing child custody battle.
Tournament director Craig Tiley said: "It's unfortunate that Azarenka is unable to travel to Australia this year. The Australian Open is her favourite tournament and she's looking forward to returning to Melbourne next year."
Last week, reigning ladies singles champion Serena Williams said she would not play at the first Slam of the year after failing to reach the level she would like to be at.
Serena beat sister Venus in the 2017 final in Melbourne, and later revealed that she was pregnant while competing in the tournament.
The 36-year-old gave birth to daughter Alexis Olympia in September, and returned to the court in an exhibition match against Jelena Ostapenko in Abu Dhabi at the end of December.
In a statement on Snapchat, she wrote: "After performing in my first match after giving birth I realised that although I am super close I'm not where I personally want to be."
The former world number one said she was "super close" to being tournament-ready but reluctantly withdrew from the competition.
She added: "My coach and team always said ‘only go to tournaments when you are prepared to go all the way’. I can compete – but I don’t want to just compete, I want to do far better than that and to do so, I will need a little more time.
"With that being said, and even though I am disappointed about it, I’ve decided not to compete in the Australian Open this year.
"The memory of last year’s Open is one that I will carry with me, and Olympia and I look forward to coming back again. I appreciate the support and understanding of my fans and everyone at the Australian Open."
It was due to be her first Grand Slam since giving birth to daughter Alexis Olympia in September.
Andy Murray, Kei Nishikori and Svetlana Kuznetsova have also withdrawn with a host of other big stars remaining doubts.
British number one Jo Konta is an injury concern. Additionally, there are also question marks over the fitness of Novak Djokovic (elbow), Garbine Muguruza (calf), Stan Wawrinka (knee) and Rafa Nadal (knee).