The American has not played competitively since withdrawing from the U.S. Open in September ahead of a second round match and has been receiving treatment for Sjogren's syndrome, an auto-immune disease that causes fatigue and joint soreness.
The five-times Wimbledon champion said she is targeting a return to action in February.
"I regret to announce that I am withdrawing from the 2012 Australian Open. After several months of training and treatment, I am making steady progress to top competitive form," Williams, 31, said in a statement on her website.
"My diet and fitness regimen have allowed me to make great strides in terms of my health and I am very close to being ready to return to WTA competition."
The Australian Open starts on January 16.
(For more sports news and updates, follow Ahram Online sports on Twitter: @AO_Sports)