The Borussia Dortmund player suffered a partial ligament tear in Friday's 6-1 friendly defeat of Armenia and has been replaced by centre-back Shkodan Mustafi in Joachim Low's 23-man squad.
Reus was left in agony following a heavy challenge from Armenia midfielder Artur Yedigaryan one minute before the end of the first half and was subsequently replaced by Lukas Podolski.
The 25-year-old was immediately taken to hospital to undergo an MRI scan, which confirmed the ligament damage.
After initial optimism over his chances of playing in Brazil, Germany confirmed his absence from the competition on Saturday morning.
"It is extremely regrettable for him and for us," Low told the media. "Marco was in excellent shape.
"He was superb in our training camp and during our friendlies against Cameroon and Armenia. He showed a real joy for playing. We all expected him to play a major role in this competition."
Speaking about Reus' replacement, the coach revealed why he picked the once-capped Sampdoria defender.
"It was not about replacing Marco Reus one-on-one," he explained. "We have great quality behind the forward already, with Lukas Podolski, Andre Schurrle, Mario Gotze, Thomas Muller, Mesut Ozil, Julian Draxler and Toni Kroos. We have many alternatives.
"That is why we decided to go with another option for our defence.
"Shkodan convinced us during the training camp. He is fit and we trust him. We know we can rely on him 100 per cent."