The Italian-born star, who is the son of Brazilian World Cup winner Mazinho, will not recover from the problem in time to join up with Luis Milla's squad
Previously shortlisted for a place in Luis Milla's squad for the Games, Thiago has been forced to withdraw after failing to recover from the niggling complaint.
"The tests on the player confirm that his shin injury is not healed and that he should continue recuperating over the next few weeks," a statement on Barcelona's official website confirmed. "The player cannot receive a medical discharge before the Olympics."
With Thiago out, coach Milla will now have to trim a further three names from his provisional 22-man list.
Milla has named a strong squad for the Games, including the likes of Jordi Alba, Iker Muniain and Juan Mata.