The talented 24-year-old has struggled in Super Rugby since returning from a hamstring injury a month ago and was criticised by local media for missing a number of tackles in the Crusaders' narrow win over the Melbourne Rebels last weekend.
"He even admitted himself he has not been on top of his game, so we have just decided to take him out of the hot seat and put him on the bench," Blackadder said.
Tom Taylor, who kicked 20 points against the Rebels to get the Crusaders over the line in Christchurch on Sunday, switches from inside centre to replace Dagg at full-back, allowing Ryan Crotty to slot back into the inside centre position.
The Crusaders' uninspiring win over the cellar-dwelling Rebels was their fifth from nine games and kept them in touch with the top six and a play-offs berth midway through the season.
However, the seven-times champions have struggled for consistency in the absence of totemic captain Richie McCaw, who is on a prolonged sabbatical from rugby, and face a tough run to the play-offs against their New Zealand conference rivals.
Blackadder can at least rely on full service from Dan Carter, welcoming the long-serving All Blacks fly-half back to the starting team after he was eased into action off the bench against the Rebels following a month on the sidelines with a hamstring injury.
Barnstorming back Robbie Fruean also returns to the starting centre position against the competition-leading Brumbies after being rested for the Rebels match.