Rossi damaged the anterior cruciate ligament in his right leg in January, but recovered to earn a place in Cesare Prandelli's provisional party.
However, the striker has now suffered heartbreak for the second successive World Cup, having also been cut from an initial squad chosen by Marcello Lippi in 2010.
After choosing to overlook Rossi and Roma forward Mattia Destro, Prandelli has five attackers at his disposal.
Torino duo Ciro Immobile and Alessio Cerci have been retained, together with Milan's Mario Balotelli, Lorenzo Insigne of Napoli and experienced Parma forward Antonio Cassano.
Milan midfielder Riccardo Montolivo had already been ruled out of the World Cup after suffering a fractured tibia in Saturday's 0-0 draw with the Republic of Ireland.
The other players to have been purged from Italy's provisional 30-man selection are Christian Maggio, Manuel Pasqual, Romulo and Andrea Ranocchia.
However, Inter defender Ranocchia is set to remain with the squad as injury cover.
Italy play Luxembourg on Wednesday before flying out to Brazil, where they will face England, Uruguay and Costa Rica in Group D.
Squad in full:
Goalkeepers: Gianluigi Buffon (Juventus), Mattia Perin (Genoa), Salvatore Sirigu (Paris Saint-Germain)
Defenders: Ignazio Abate (Milan), Andrea Barzagli (Juventus), Leonardo Bonucci (Juventus), Giorgio Chiellini (Juventus), Matteo Darmian (Torino), Mattia De Sciglio (Milan), Gabriel Paletta (Parma)
Midfielders: Alberto Aquilani (Fiorentina), Antonio Candreva (Lazio), Daniele De Rossi (Roma), Claudio Marchisio (Juventus), Marco Parolo (Parma), Andrea Pirlo (Juventus), Thiago Motta (Paris Saint-Germain), Marco Verratti (Paris Saint-Germain)
Forwards: Mario Balotelli (Milan), Antonio Cassano (Parma), Alessio Cerci (Torino), Ciro Immobile (Torino), Lorenzo Insigne (Napoli)
Reserve: Andrea Ranocchia (Inter)