The 22-year-old had been expected to have a fitness test on Tuesday, with the first Test of three starting on Wednesday, but coach Mike Hesson said at University Oval that he was still unable to put any weight on the foot.
"The physio before we came to training said he was no chance of playing so we've removed him from the 12," Hesson said.
"He'll stay with us during the week and hopefully be ready in time for the second Test."
Neil Wagner is likely to slot into the side in the third pace bowler role. Ian Butler, who was brought in as cover in case Bracewell failed to recover, and left arm spinner Bruce Martin would contest the final place in the starting side.
Bracewell sustained the injury while cleaning up his house in Napier after a party on Friday when some friends came over to watch Super Rugby matches.
New Zealand Cricket were forced to address the issue after local media reports said neighbours had complained about excessive noise at Bracewell's house last Thursday when the player was out of town.
"We've told Doug that he needs to take responsibility for what happens around him and that he needs to do all he can to ensure his preparation for international cricket is not compromised," team manager Mike Sandle said.
"Doug is very sorry for any inconvenience he has caused his team-mates and members of the public, and he has apologised to his neighbour in Napier."
Captain Brendon McCullum said he felt the incident had been blown out of proportion.
"It was an accident, and that's unfortunate, because it's rubbed him out of a (Test) which he was determined to be at his best for," McCullum said.
"It's disappointing from his point of view, but I stress that I think he'll be back for the second Test and I also stress it gives Neil Wagner an opportunity."
Hesson emphasised that Bracewell was unavailable due to the injury and had not been dropped for disciplinary issues.
"Doug was away from the team and ... there's not a lot we can do when he's away from the side," Hesson added.
"The expectation is that what they do certainly doesn't conflict or affect their preparation and we're pretty strong on that.
"(But) in terms of this Test match he's got a hole in his foot caused by standing on some glass and that's a big loss (and) really disappointing for Doug and the team because he's a crucial part of our seam attack."