The top-ranked Djokovic told BBC Sports on Friday that "the match is not happening this year" because of Nadal's injury.
Djokovic and Nadal had expressed doubt as to whether they would play the Dec. 22 match, as Saudi Arabia is under growing pressure from the international community following the killing of Saudi writer Jamal Khashoggi after he entered Saudi Arabia's consulate in Istanbul on Oct. 2.
Khashoggi was a Washington Post columnist who had written critically of Saudi Arabia's crown prince.
The players had not withdrawn from the event, however, saying invitations were made at least one year ago. Roger Federer had turned down the invitation, saying he "didn't want to play there at that time."
Amnesty International had urged Nadal and Djokovic not to play.
No. 2-ranked Nadal pulled out of the season-ending ATP Finals because of an abdominal injury, then underwent surgery on his right ankle in an attempt to start 2019 healthy.