Australia included fast bowler Michael Neser in the squad with Hazlewood reportedly being given further time to recover and prepare for the Ashes in England.
Australian fast bowler Josh Hazlewood was on Sunday ruled out of the World Test Championship final after failing to recover from the side strain he picked up during his IPL stint, dealing a huge blow to his side ahead of the marquee match against India. (More Cricket News)
The WTC final is scheduled at the Oval from June 7-11.
Pacer Michael Neser replaced Hazlewood in the squad as the selectors hoped that the latter will recover to be fit for the Ashes series.
"Josh was very, very close to being given the green light but we are cognisant that our upcoming schedule means this is not a one-off Test match for us," Chair of Selectors George Bailey was quoted as saying in cricket.com.au.
Hazlewood had sustained the side strain during his injury-marred stint with Royal Challengers Bangalore (RCB) in the recently-concluded IPL in which he played only three games without much success before flying back home.
Hazlewood had returned to bowling upon his return in Sydney, since scans had shown no damage or injury.
The five-Test Ashes series in England will start on June 16, and Hazlewood, who has already missed a plenty of Test cricket action for Australia, will get more time to be ready for the all-important series.
"This (break) will give Josh an ideal preparation leading into Edgbaston. With six Test matches in a little over seven weeks we will need all of our fast bowling assets." Bailey added.
Neser has been playing in the County Championship for Glamorgan this season and has been in fine rhythm, having taken 14 wickets in his last three games which includes 7/32 against Yorkshire. He has played two Tests for Australia and has got seven wickets.
"Michael's County form has been strong and knowing that he was going to be close by allowed for him to keep playing and for us to be able to call on him. He is a great strength to have as part of the fast bowling group," the former Australian skipper said.
However, it is fast medium bowler Scott Boland, who looks a more likely first XI starter in Hazlewood's absence, in conditions which suits seam-up, hit-the-deck the type of deliveries.
Coach Andrew McDonald said while his side is eager to win their maiden WTC title, the tight turnaround to the five-Test Ashes campaign remains a consideration in managing their fast bowlers.
"Definitely consideration for (the schedule) - we don't want to go too far ahead," McDonald told reporters.
Even though Hazlewood is considered one of the pillars of three-man Australia pace attack, the 32-year-old has not featured regularly in Test cricket, playing only four of the last 19 matches owing to a spate of injuries.
"We have got the WTC final to play, which we are excited about, but on the back of that we have to quickly turn our attention to England and the Ashes. There are short turnarounds there. That's nothing we are not used to.
"So, there'll always be considerations around management … I'd say there'd be some moving parts amongst the quicks."