Tournament officials said Tuesday he will be replaced in the 156-player field by Mike Donald.
Ballesteros made his Champions Tour debut last week in Alabama, finishing tied for last after shooting 78-81-73 in the Regions Charity Classic.
Prior to last week, Ballesteros had played only two tournaments in the last two years, the British Open last year and the Masters.
The Ocean Course at Kiawah Island Golf Resort will host this week's Championship. The course is remembered by many of the world's best golfers as the host of the dramatic 'War by the Shore' Ryder Cup in 1991. Competitors struggled through three days of whipping winds and wayward shots, and Ballesteros won one hole with a double-bogey 7.