Phil Tataurangi of New Zealand, No. 66 in the world ranking, will replace Faldo in the field and play Tiger Woods in the opening round.
Faldo is ranked 56th. Toru Taniguchi (No. 55) previously withdrew because of injury.
The Accenture Match Play Championship starts Wednesday at La Costa Resort for the top 64 players available from the world ranking.
It was the first time Faldo, a three-time Masters and British Open champion, had qualified for the Match Play since its debut in 1999, when he was the 64th seed and lost to Woods in the opening round.
His withdraw jumbles 11 first-round pairings, although they will not be final until Monday.
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