"I had a phone call from Juan Monaco's management this morning which indicated to me that he had a hand injury," tournament director Colin Stubs said.
"They're not certain how serious it is but he has been advised by his doctor not to play in the next few days with the hope that he can take his place in the Australian Open."
The Argentine's spot in the eight-man tournament, which starts on Wednesday, was taken by Paul-Henri Mathieu, Stubs said.
World number 19 Kei Nishikori also said at the club in a leafy suburb close to Melbourne's central city the knee injury that forced him out of the semi-finals in Brisbane on Saturday was still causing him problems and he did not know if he would play at Kooyong.
"I don't know," he said when asked if whether he could play.
"I'm going to try to hit today and let's see how it goes.
"It's not bad. Let's cross the fingers and hopefully it will be okay."
ATP Sydney results
Bernard Tomic (Australia) beat Marinko Matosevic (Australia) 6-3 6-4
Ryan Harrison (US) beat Roberto Bautista (Spain) 2-1 (Bautista retired)
Kevin Anderson (South Africa) beat Aljaz Bedene (Slovenia) 6-3 3-6 6-3
Fabio Fognini (Italy) beat Grigor Dimitrov (Bulgaria) 6-3 6-1
John Millman (Australia) beat Tommy Robredo (Spain) 6-3 6-4
Jarkko Nieminen (Finland) beat Bjoern Phau (Germany) 6-0 6-1
Feliciano Lopez (Spain) beat 7-Jeremy Chardy (France) 6-7(2) 7-5 6-3
6-Radek Stepanek (Czech Republic) beat Guillermo Garcia-Lopez (Spain) 6-2 6-3
ATP Auckland results
Lu Yen-Hsun (Taiwan) beat Benoit Paire (France) 6-3 2-6 6-2
Gael Monfils (France) beat Benjamin Becker (Germany) 6-7(2) 6-3 6-4
Jesse Levine (Canada) beat Daniel King-Turner (New Zealand) 6-2 6-2
Alejandro Falla (Colombia) beat Grega Zemlja (Slovenia) 6-4 3-1 (Zemlja retired)
Greg Jones (Australia) beat 6-Jurgen Melzer (Austria) 7-6(7) 6-2
Igor Sijsling (Netherlands) beat Robin Haase (Netherlands) 3-6 6-3 7-5
Lukas Lacko (Slovakia) beat Paolo Lorenzi (Italy) 6-3 6-3
Santiago Giraldo (Colombia) beat Go Soeda (Japan) 6-1 6-0